First Investment
Your first investment in Germany can be made with a minimum of €1-25 through an online broker by opening a Depot (brokerage account) and setting up a Sparplan (automatic investment plan) for an index ETF. The entire process takes 15-30 minutes for online registration plus 1-3 business days for document verification [1].
This article is for those in the Ladder phase (from 2 years in Germany): you have stable income, a financial cushion for 3-6 months of expenses, and you're ready to direct part of your money toward long-term growth.
Psychological Dimension
The first investment is psychologically more difficult than mathematically. After experience with post-Soviet financial systems — defaults, devaluation of "guaranteed" products, bankruptcies — distrust of investments is rational, not irrational.
The German system is structurally different:
- Deposit protection up to €100,000 — legally secured Einlagensicherung scheme [2]
- BaFin regulation — federal financial market supervisory authority [3]
- Asset separation — your securities are legally separated from the broker's assets (they remain yours even if broker goes bankrupt) [4]
This doesn't guarantee the market won't fall — it will fall, that's normal. But it means systemic risk (money disappearing due to institutional collapse) is minimized by law.
Trust in the system builds gradually. Starting with small amounts is not a sign of indecision, but a rational strategy for testing the system under high uncertainty.
Prerequisites
Before the first investment, the following conditions must be met:
| Requirement | Why |
|---|---|
| Financial cushion of 3-6 months expenses | Investments can drop 30-50% in a crisis. If you need money urgently, you'll have to sell at a loss [5]. |
| Tax number (Steuer-ID) | Required to open Depot — broker withholds tax on profits (Kapitalertragsteuer 25% + Soli 5.5% of tax) [6]. |
| Residency in Germany | Most online brokers require a German registration address. |
| Investment horizon minimum 10 years | Market is volatile short-term. Historically MSCI World index recovered from any crisis in 3-7 years, but no guarantees [7]. |
If at least one condition is not met — stop. Investing without a cushion or short horizon turns an instrument of growth into a source of financial stress.
What Is Depot and How It Works
Depot (brokerage account) is an account for buying and storing securities: stocks, bonds, ETFs (exchange-traded funds). Unlike Girokonto (checking account), you don't store money for daily spending in a Depot — it's designed for investing.
Types of Depot
| Type | Who Offers | Fees | For Whom |
|---|---|---|---|
| Online broker (Neobroker) | Trade Republic, Scalable Capital, finanzen.net zero | €0-3/month, often €0 for Sparplan execution [8] | Beginners, independent investors, cost minimalists |
| Classic broker | ING, Consorsbank, comdirect | €0-5/month for Depot, €1.50-10 for Sparplan [9] | Those who value established brand and ready to pay for it |
| Bank Depot | Sparkasse, Commerzbank | €10-30/month + high transaction fees [10] | Rarely justified for passive investing |
For first investment, start with an online broker — minimal costs, simple interface, fast registration.
Legal Protection
Your assets in Depot are legally protected:
- Securities are your property, not the broker's asset [4]
- In case of broker bankruptcy, your stocks/ETFs are transferred to another custodian
- Cash on broker account (not invested) is insured up to €100,000 through Einlagensicherung [2]
Step-by-Step Process to Open Depot
Step 1: Choose a Broker
Selection criteria:
| Criterion | What to Look For |
|---|---|
| Sparplan fee | Ideally €0, acceptable up to 1.5% [8] |
| Minimum Sparplan amount | €1-50/month (depends on broker) [11] |
| ETF selection | Minimum 300-500 ETFs in assortment, including popular index funds [8] |
| Interface convenience | Mobile app in Russian/English (optional) |
| Licensing | BaFin license mandatory — check on broker website [3] |
Examples of online brokers (not a recommendation):
- Trade Republic — Sparplan from €1, fee €0, simple interface [12]
- Scalable Capital — Sparplan from €1, free tier Free Broker available [13]
- finanzen.net zero — Sparplan from €25, fee €0 [14]
Step 2: Registration
Process is standardized:
- Fill out form — name, address, Steuer-ID, tax residency
- Identity verification — VideoIdent (video call with passport, 5-10 minutes) or PostIdent (at post office)
- Confirmation — broker sends contract and account details via email (1-3 business days)
Important: During registration you'll be asked about investment experience. Answer honestly — it's not an exam, but a regulator requirement. Broker must assess your knowledge level [15].
Step 3: Set Up Freistellungsauftrag
Freistellungsauftrag (tax exemption order) is an instruction to broker not to withhold tax on the first €1,000 of profit per year (€2,000 for married couples) [6].
Without Freistellungsauftrag, broker will withhold 26.375% tax on all profit — even if it's below the limit. You can recover the excess through Steuererklärung (tax return), but it's extra work.
Set up in broker's personal account in 2 minutes. If you have multiple Depots — distribute the €1,000 limit between them (e.g., €500 + €500).
Step 4: Fund the Account
Transfer money from your Girokonto to broker account (IBAN specified in contract). Transfer takes 1-2 business days.
Starting amount: You can start with €25-100 to test the system and psychologically adapt.
Choosing Your First ETF
ETF (Exchange Traded Fund) is an exchange-traded fund that automatically copies an index (e.g., MSCI World — 1,500+ largest companies in the world) [16].
ETF Selection Criteria for Beginners
| Criterion | Recommendation | Why |
|---|---|---|
| Fund type | Physically replicating (physical replication) | Transparency: fund actually owns the stocks [17] |
| Dividend accumulation or distribution | Accumulating (thesaurierend) | Automatic reinvestment, no tax until sale [18] |
| Fund size (AUM) | Minimum €100 million | Liquidity and low risk of fund closure [19] |
| TER (Total Expense Ratio) | Under 0.3% annually | Fund management costs [20] |
| Fund domicile | Ireland or Luxembourg | Tax efficiency for German residents [21] |
Examples of Popular ETFs (not a recommendation)
| ETF | Index | TER | Type |
|---|---|---|---|
| iShares Core MSCI World (ISIN: IE00B4L5Y983) | MSCI World (developed markets) | 0.20% | Accumulating [22] |
| Vanguard FTSE All-World (ISIN: IE00BK5BQT80) | FTSE All-World (developed + emerging) | 0.22% | Accumulating [23] |
| SPDR MSCI ACWI IMI (ISIN: IE00B3YLTY66) | MSCI ACWI IMI (global, including small cap) | 0.17% | Accumulating [24] |
For first investment, one global index ETF is enough. Diversification by countries, sectors, currencies is already built in.
Setting Up Sparplan (Automatic Investment Plan)
Sparplan is automatic deduction of a fixed amount from your account to purchase selected ETF (monthly, quarterly, etc.) [25].
Sparplan Advantages
| Advantage | Explanation |
|---|---|
| Cost averaging | You buy both on rise and fall — reduces risk of bad timing [26] |
| Automation | No need to decide each time "to buy or not" — reduces emotional burden |
| Discipline | Investing becomes a habit, like paying rent |
How to Set Up
- In broker personal account: "Sparplan" or "Savings Plan" section
- Select ETF by ISIN (international securities code)
- Specify amount — from €1 to €10,000/month (depends on broker) [11]
- Choose frequency — usually monthly, first or fifteenth of month
- Confirm — money will be deducted automatically
You can change or cancel Sparplan anytime — it's not a multi-year commitment.
How Much to Invest
There's no universal answer — depends on income, expenses, goals, psychological comfort.
Framework for Determining Amount
| Factor | How to Account For |
|---|---|
| 50/30/20 rule | 20% of net income for savings/investments [27] |
| After mandatory expenses | Invest only what you won't need for 10+ years |
| Psychological comfort | Amount shouldn't cause anxiety. Start with €50-100, increase gradually |
| Long-term perspective | €200/month for 20 years at 7% annually ≈ €104,000 (before taxes and inflation) [28] |
Start small. Psychologically, it's more important to form a habit than to immediately invest large amounts.
Taxation
Investment profits in Germany are taxed:
- Kapitalertragsteuer (capital gains tax): 25%
- Solidaritätszuschlag (solidarity surcharge): 5.5% of Kapitalertragsteuer = 1.375%
- Kirchensteuer (church tax): 8-9% if you're a church member [6]
Total: 26.375% without church tax.
What Is Taxed
- Profit from ETF sale (difference between purchase and sale price)
- Dividends from stocks or distributing ETF
- Not taxed: Unrealized profit (ETF value growth that you haven't sold yet)
Freistellungsauftrag (again)
First €1,000 of profit per year is exempt from tax (€2,000 for couples) [6]. Set this up in each Depot.
Vorabpauschale (Advance Lump-Sum Tax)
Since 2018, Germany introduced Vorabpauschale — minimum tax on accumulating ETFs even if you haven't sold them [29]. Calculated based on Bundesbank base rate and fund value at beginning of year.
In practice: With low interest rates (2023-2025), Vorabpauschale is about 0.5-1% of fund value. Broker automatically deducts tax in January of following year.
Example: If your ETF is worth €10,000, Vorabpauschale ≈ €50-100 per year (depends on base rate).
Risks and Trade-offs
| Risk | Explanation | How to Reduce |
|---|---|---|
| Market risk | Index can drop 30-50% in crisis (as in 2008, 2020) [30] | Invest for 10+ years, don't sell in panic |
| Currency risk | If ETF in dollars, €/$ exchange rate affects your profit [31] | Accept as part of global diversification |
| Inflation risk | 7% annual growth minus 2% inflation = 5% real growth | Stocks historically outpace inflation long-term [32] |
| Liquidity risk | Small ETFs may close [19] | Choose funds with AUM above €100 million |
| Psychological risk | You'll sell at bottom out of panic | Automate through Sparplan, don't check account daily |
Key point: Volatility (price fluctuations) is not a risk if you don't sell. Risk is selling at a loss due to emotions or lack of safety cushion.
When NOT to Invest
| Situation | Why |
|---|---|
| No financial cushion | You'll be forced to sell in crisis |
| Money needed in 1-5 years | Market may be down exactly then |
| High debt (loans above 5%+) | More profitable to pay off debt than invest at 7% with risk [33] |
| Boat phase (first 1-2 years in Germany) | Focus on survival and stability, not growth |
| Psychologically not ready to see minus 30% | That's normal. Wait until trust in system strengthens |
Checklist Before First Investment
- Financial cushion for 3-6 months expenses exists
- Tax number (Steuer-ID) obtained
- Online broker with BaFin license chosen
- Depot opened and verified
- Freistellungsauftrag set up
- Global index ETF chosen (MSCI World / FTSE All-World / ACWI)
- Sparplan set up for comfortable amount
- Understand money is locked for 10+ years
- Ready for 30-50% drawdowns without panic
When Professional Help Is Needed
Consult Honorarberater (independent financial advisor) or Steuerberater (tax consultant) if:
- Complex tax situation — income in multiple countries, inheritance, cryptocurrency
- Large amounts — inheritance, business sale, severance pay above €50,000
- Need individual plan — accounting for pension, real estate, children, inheritance
- Doubts about choice — afraid to make mistake with large amount
Don't consult bank "advisors" — their job is to sell bank products, not optimize your wealth.
FAQ
Not legal or financial advice.
VideoIdent keeps failing with my foreign passport — what can I do?
VideoIdent failures with non-EU passports are a common problem. The verification service may not recognize the document format, security features, or character encoding. Alternatives: (1) PostIdent — visit any Deutsche Post branch with your passport, the clerk verifies identity in person. Slower (2-5 business days) but more reliable for foreign documents; (2) use your Aufenthaltstitel (residence permit card) if the broker accepts it — some do; (3) try a different broker — recognition rates vary between verification providers (IDnow, WebID, etc.); (4) some brokers (e.g., ING, Consorsbank) offer in-branch identification. If you have a German Personalausweis (ID card for German citizens), this is irrelevant — but for residents with foreign passports, PostIdent is the most reliable fallback. Contact the broker's support with your specific document type before attempting multiple failed verifications.
I received a large sum (inheritance, relocation) — invest it all at once or via Sparplan?
Academic research (Vanguard 2012) shows lump-sum investing outperforms spreading over time in about two-thirds of historical periods, because markets generally rise and delayed investment means missed returns. However, the psychological dimension matters more for immigrants: investing a large sum (e.g., €50,000 from selling property or inheritance) and seeing a 20% drop in the first year is emotionally devastating for someone who has already experienced financial losses. A phased approach — for example, investing 20% immediately and 20% each quarter over the next year — sacrifices some expected return for psychological sustainability. The difference in expected outcome between immediate and 12-month phased investment is typically 1-3% of the total. Tax consideration: a large one-time investment means higher Vorabpauschale (advance lump-sum tax) from January of the following year.
My home country taxes foreign investment income — double taxation?
If you are a German tax resident (unbeschränkt steuerpflichtig, unlimited tax liability), Germany taxes your worldwide income — including investment income. If your country of citizenship also claims the right to tax your investment income, the DBA (Doppelbesteuerungsabkommen, double taxation agreement) between Germany and that country determines which country has priority. Most DBAs assign capital gains taxation to the country of residence (Germany), eliminating the home country's claim. However: (1) some countries (e.g., USA for citizens and green card holders) tax based on citizenship regardless of residence; (2) some countries have no DBA with Germany; (3) even with a DBA, you may need to file a tax return in your home country to claim the exemption. Practical step: check the specific DBA text (available on BMF website) and consult a Steuerberater (tax advisor) experienced in international tax law if your situation involves dual tax obligations.
Can I keep my existing foreign brokerage account (Interactive Brokers, etc.)?
Yes, but with tax compliance obligations. As a German tax resident, you must declare ALL investment income from foreign accounts in your Steuererklärung (tax return, Anlage KAP and Anlage KAP-INV). Foreign brokers do NOT withhold German Kapitalertragsteuer (capital gains tax) — you are responsible for declaring and paying it yourself. This means: (1) no automatic Freistellungsauftrag (tax exemption order) — you claim the Sparerpauschbetrag (saver's tax-free allowance) through your tax return; (2) Vorabpauschale (advance lump-sum tax) on accumulating ETFs must be calculated and declared manually; (3) all dividend and capital gains documentation in EUR is required (convert using ECB reference rates). Interactive Brokers specifically: they issue annual tax reports, but these follow US/international formats, not German Anlage KAP requirements — manual adjustment or a Steuerberater (tax advisor) is typically needed. A German Depot (brokerage account) simplifies compliance significantly because the broker handles all tax withholding automatically.
I invested in crypto in my home country — how do I report this in Germany?
Cryptocurrency gains in Germany are taxed as private Veräußerungsgeschäfte (private disposal transactions, § 23 EStG), NOT as Kapitalertragsteuer (capital gains tax). Key rules: (1) if held for more than 1 year (Haltefrist, holding period), gains are completely tax-free — regardless of amount; (2) if sold within 1 year, gains above €1,000 (since 2024, previously €600) are taxed at your personal income tax rate (up to 45%); (3) the purchase date and cost basis from your home country carry over — you need documentation of original purchase price and date; (4) crypto-to-crypto trades (e.g., BTC to ETH) are taxable disposal events; (5) staking and lending income is taxed as Einkünfte aus sonstigen Leistungen (other income). Declaration goes in Anlage SO of the Steuererklärung (tax return). Keep complete transaction records — exchanges like Binance or Coinbase provide export tools. German tax authorities are increasingly cross-referencing exchange data through international information sharing agreements.
Sources
- Trade Republic, "Konto eröffnen" — Registration and verification process, Trade Republic Support, accessed 2025, https://support.traderepublic.com/de-de/103-Wie-er%C3%B6ffne-ich-ein-Konto
- Bundesverband deutscher Banken, "Einlagensicherung" — Deposit guarantee system in Germany, 2024, https://bankenverband.de/service/einlagensicherung/
- BaFin, "Unternehmensdatenbank" — Database of licensed financial organizations, Bundesanstalt für Finanzdienstleistungsaufsicht, 2025, https://www.bafin.de/DE/PublikationenDaten/Datenbanken/Unternehmensdatenbank/unternehmensdatenbank_node.html
- Börse Frankfurt, "Wertpapierdepot: Ihre Wertpapiere sind Sondervermögen" — Legal status of securities in Depot, Deutsche Börse AG, 2024, https://www.boerse-frankfurt.de/wissen/etf/depot
- MSCI, "MSCI World Index Historical Data" — Historical volatility data for index, MSCI Inc., 2024, https://www.msci.com/documents/10199/149ed7bc-316e-4b4c-8ea4-43fcb5bd6523
- Bundesministerium der Finanzen, "Abgeltungsteuer" — Taxation of capital income, 2024, https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Weitere_Steuerthemen/Abgeltungsteuer/abgeltungsteuer.html
- Vanguard, "Investing for the long term: Why time in the market beats timing the market" — Study on investment horizons, Vanguard Research, 2023, https://investor.vanguard.com/investor-resources-education/news/why-time-in-the-market-beats-timing-the-market
- Finanztip, "Die besten ETF-Depots 2025" — Comparison of online brokers and fees, Finanztip Verbraucherinformation gGmbH, January 2025, https://www.finanztip.de/wertpapierdepot/
- Stiftung Warentest, "Depotkosten-Rechner: Was Depots kosten" — Depot cost calculator, Stiftung Warentest, December 2024, https://www.test.de/Depotkosten-Rechner-1136502-0/
- Verbraucherzentrale, "Wertpapierdepot: Gebühren vergleichen" — Bank Depot costs, Verbraucherzentrale Bundesverband, 2024, https://www.verbraucherzentrale.de/wissen/geld-versicherungen/sparen-und-anlegen/wertpapierdepot-gebuehren-vergleichen-13004
- Scalable Capital, "Sparplan anlegen" — Minimum amounts and Sparplan conditions, Scalable Capital Support, 2025, https://de.scalable.capital/hilfe/sparplan-anlegen
- Trade Republic, "Kosten & Gebühren" — Trade Republic fees and commissions, 2025, https://traderepublic.com/de-de/kosten
- Scalable Capital, "Preise" — Scalable Capital pricing plans, 2025, https://de.scalable.capital/preise
- finanzen.net zero, "Konditionen" — finanzen.net zero conditions, 2025, https://www.finanzen-zero.de/konditionen
- BaFin, "WpHG: Wohlverhaltensregeln" — Requirements for assessing client knowledge, Bundesanstalt für Finanzdienstleistungsaufsicht, 2024, https://www.bafin.de/DE/Aufsicht/BankenFinanzdienstleister/Wohlverhaltensregeln/wohlverhaltensregeln_node.html
- Blackrock, "What is an ETF?" — What is an ETF, iShares by Blackrock, 2024, https://www.ishares.com/us/education/what-is-an-etf
- Morningstar, "Physical vs. Synthetic ETFs: What's the Difference?" — Physical and synthetic replication, Morningstar Research, 2023, https://www.morningstar.com/lp/etf-replication-methods
- Deutsche Bundesbank, "Thesaurierende und ausschüttende Fonds" — Accumulating and distributing funds, Bundesbank Eurosystem, 2024, https://www.bundesbank.de/de/service/schule-und-bildung/erklaerfilme/thesaurierende-und-ausschuettende-fonds-796854
- justETF, "ETF-Größe: Warum ist sie wichtig?" — Fund size and liquidity risks, justETF GmbH, 2024, https://www.justetf.com/de/academy/etf-groesse.html
- European Securities and Markets Authority (ESMA), "Key Information Documents (KIDs): TER explanation" — TER explanation, ESMA, 2024, https://www.esma.europa.eu/
- PwC Germany, "Fund Domicile: Ireland vs Luxembourg for German Investors" — Tax efficiency of fund domicile, PricewaterhouseCoopers, 2023, https://www.pwc.de/en/financial-services/asset-management.html
- iShares, "iShares Core MSCI World UCITS ETF (ISIN: IE00B4L5Y983)" — ETF fact sheet, Blackrock, December 2024, https://www.ishares.com/de/privatanleger/de/produkte/251882/
- Vanguard, "Vanguard FTSE All-World UCITS ETF (ISIN: IE00BK5BQT80)" — ETF fact sheet, Vanguard Group, December 2024, https://www.vanguard.de/de/professionell/anlageprodukte/etf/aktien/9679/ftse-all-world-ucits-etf-usd-accumulating
- State Street Global Advisors, "SPDR MSCI ACWI IMI UCITS ETF (ISIN: IE00B3YLTY66)" — ETF fact sheet, SSGA, December 2024, https://www.ssga.com/de/de/institutional/etfs/funds/spdr-msci-acwi-imi-ucits-etf-acc-smia-gy
- Verbraucherzentrale, "Sparplan: Regelmäßig Geld anlegen" — Explanation of Sparplan mechanism, Verbraucherzentrale Bundesverband, 2024, https://www.verbraucherzentrale.de/wissen/geld-versicherungen/sparen-und-anlegen/sparplan-regelmaessig-geld-anlegen-12805
- Vanguard Research, "Dollar-cost averaging vs. lump-sum investing" — Study on cost averaging, Vanguard, 2022, https://investor.vanguard.com/investor-resources-education/news/dollar-cost-averaging-vs-lump-sum-investing
- U.S. Senator Elizabeth Warren, "All Your Worth: The Ultimate Lifetime Money Plan" — 50/30/20 rule, Free Press, 2006 (adapted for German context)
- Compound Interest Calculator — online compound interest calculator (available at Investor.gov, SEC), 2025, https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
- Bundesministerium der Finanzen, "Investmentsteuerreform: Vorabpauschale" — Explanation of Vorabpauschale, BMF, 2024, https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Weitere_Steuerthemen/Investmentsteuerreform/investmentsteuerreform.html
- S&P Dow Jones Indices, "S&P 500 Historical Drawdowns" — Historical index drawdowns, S&P Global, 2024, https://www.spglobal.com/spdji/en/indices/equity/sp-500/
- European Central Bank, "EUR/USD Exchange Rate Historical Data" — Historical euro/dollar rate data, ECB, 2024, https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-usd.en.html
- Deutsche Bundesbank, "Langfristige Renditen von Aktien und Anleihen" — Long-term stock returns vs inflation, Bundesbank Monatsbericht, October 2023, https://www.bundesbank.de/de/publikationen/berichte/monatsberichte
- Finanztip, "Schulden abbauen oder Geld anlegen?" — Priority of debt repayment, Finanztip, 2024, https://www.finanztip.de/schulden-abbauen-oder-geld-anlegen/