Five tips on investing in shares and funds

At the end of 2024, the amount of financial assets owned by private households in Germany was more than nine trillion euros. The largest share of this – around 37.6 percent – was held in cash, in current accounts, instant access savings accounts and in traditional savings accounts. Only 18.7 percent of these assets were invested in shares and only 2.3 percent in bonds. Another 12.9 percent was held in investment funds.
Yet, investing in shares offers good opportunities for building up a small fortune in the long term. If you are planning to invest your money in shares and funds, you should bear in mind the following points:

1. Open a securities Account

In order to be able to invest in shares and funds, you need a securities portfolio. You can open one at your local bank, a direct bank or with an online broker. Portfolio management is subject to annual deposit fees, which vary from institution to institution. Some banks do not charge them at all. So, it’s worth shopping around. If you want to invest small amounts regularly then you should consider fund savings schemes with actively managed funds or ETFs. You can generally invest from as little as 25 euro per month in a wide range of shares and other securities.

2. Only invest a portion of your savings

Don’t invest all your assets. Keep sufficient financial reserves set aside that you can access at short notice. Money for repairs (e.g. to your flat or house) and emergencies, as well as money for larger purchases you plan to make soon, should be saved in your current account or instant access savings account.
As a new investor on the capital market, it’s very important you’re not tempted to buy shares on credit. If prices fall and your investment does not pay off, you could end up facing serious financial losses.

3. Choose the right proportion of shares in your Portfolio

The most common rule of thumb here is: 100 minus your age. That’s the percentage of shares you should have in your securities portfolio. As you get older, the portion of shares in your portfolio should ideally decrease. This is because the amount of time you have to offset possible losses is also decreasing. However, if you’re already thinking about your future beneficiaries, you can change this strategy as the investment horizon has also changed. 
It’s therefore important to take your individual situation into account and, if necessary, get financial advice. This is because the proportion of shares in your securities account will depend on the investment period, how diversified they are and how much risk you are willing and able to accept given your current financial situation.

4. Invest long-term and diversify

The stock market is constantly fluctuating. So, an investment period of at least ten years is recommended. This will allow you to offset any price fluctuations. Spread your investment across a variety of economic sectors and regions to minimise risk. Broad diversification reduces dependence on the performance of individual shares or markets, thereby reducing the risk of incurring losses.

5. Avoid restructuring, unless you are closing out your Investments

Every time you buy and sell a security, a fee is charged. So, it’s important to keep an eye on the fees and avoid constantly restructuring your portfolio. As the German saying goes, buying and selling is a great way to empty your pockets. 
Instead, you should check once or twice a year whether the ratio of high-risk to conservative securities in your portfolio still corresponds to your original strategy. If it doesn’t then you should make the necessary changes. You should also make sure your investments continue to deliver what you expect from them. Your bank can also provide competent support to help you do this.

However, it’s different if you know you’ll need the money at a specific time. In this case, around three to five years ahead, you should start gradually shifting your higher-risk positions into more conservative investments.

Another tip: be careful of so-called ‘dead cert’ investment tips, especially if you hear about them by email or from a cold call. Instead, trust your bank to give you professional advice. They will help you choose the most suitable investments based on your expectations and risk profile.