You finally have your German income stabilised, some savings building, and the dawning realisation that money sitting in a German current account earns nothing while inflation nibbles it. Investing is the obvious next step, but you do not know where Germans actually put their money, what a "Depot" is, or how much the taxman takes when you eventually sell. The mechanics look foreign, and the tax adds a wrinkle, so many expats simply leave cash idle for years.
Investing in Germany is genuinely accessible, low-cost brokers, simple ETF savings plans, and a clear (if fixed) tax on gains. Once you know the four pieces, the Depot, the Sparplan, the broker, and the capital-gains tax with its allowance, you can put money to work with a few taps. Here is how.
The starting point: a Depot
To hold investments in Germany you need a Depot (Wertpapierdepot), a securities account separate from your everyday bank account. It is where your shares, ETFs, and funds live.
You open one with a broker or a bank, and with many providers it is free to open and hold. To set it up you generally need a German tax ID and usually a German bank account to fund it, so the Depot follows naturally once your banking is sorted (see N26 vs Sparkasse for the account side).
Once the Depot exists, you fund it from your bank account and start buying investments. Think of the Depot as the container; what you put in it is the next decision.
ETFs and the Sparplan
The most common starting investment for ordinary investors in Germany is a broad, low-cost ETF (exchange-traded fund) tracking a wide index, and the most common way to buy it is a Sparplan.
- An ETF spreads your money across many companies at low cost, rather than betting on single stocks.
- A Sparplan (savings plan) is an automatic recurring investment: a fixed monthly amount invested into your chosen ETF.
The Sparplan is the simplest, most disciplined approach: you set, say, a monthly amount, and it invests automatically, cost-averaging over time so you are not trying to time the market. Many brokers offer ETF Sparpläne from small monthly sums, sometimes with no order fee, making it cheap to start small and build steadily. This is how a large share of German retail investors actually invest.
Choosing a broker
You open the Depot with a broker, and the market spans cheap app-based neobrokers to traditional banks.
- Neobrokers (such as Trade Republic, Scalable Capital, and similar): app-based, low or no fees, free or cheap ETF Sparpläne, simple interfaces. Popular with newer and younger investors for the low cost and ease.
- Direct banks and traditional banks: more features and support, sometimes higher fees, useful if you want everything under one roof.
For most newcomers starting with an ETF Sparplan, a low-cost neobroker is the straightforward choice: free Depot, cheap or free monthly ETF investing, and an English-friendly app in several cases. Compare on Sparplan fees, available ETFs, and whether the interface is in a language you read comfortably. The point is to start; the exact broker matters less than beginning.
The tax: Kapitalertragsteuer and the allowance
Here is the part that surprises people, and where a little setup saves money.
Investment income in Germany, capital gains, dividends, and interest, is subject to Kapitalertragsteuer, a flat withholding of about 25 percent, plus the solidarity surcharge and, if you are a registered church member, church tax. It is withheld at source by the broker, so you do not get a shock bill, the tax comes off when gains are realised.
But there is a valuable shield: the Sparerpauschbetrag, an annual tax-free allowance of €1,000 per person (€2,000 for jointly assessed couples). Income within that allowance is not taxed. To use it automatically, set up a Freistellungsauftrag (exemption order) with your broker, instructing them to leave gains up to the allowance untaxed. Without one, the broker taxes from the first euro and you would have to reclaim it via your tax return.
So the practical setup: open the Depot, set up the Freistellungsauftrag immediately, and the first €1,000 of gains each year flows tax-free. Note this is the standard regime for stocks and ETFs; crypto is taxed completely differently, so do not assume the same rules apply there.
Where investing fits your bigger picture
Investing complements, rather than replaces, the other parts of your German financial life.
It sits alongside the pension pillars: the state pension, the company pension (Betriebsrente), and private pensions like Riester and Rürup. A self-directed ETF Sparplan gives you flexible, liquid investing that you control, versus the tax-advantaged-but-restricted pension products. Many people use both: pensions for the tax breaks and structure, a Depot Sparplan for flexible long-term growth.
A few sensible principles for newcomers: start with broad, low-cost ETFs rather than stock-picking; invest steadily via a Sparplan rather than lump-sum timing; keep an emergency cash buffer outside the Depot; and understand that investing carries risk, values fall as well as rise, so invest money you will not need soon. None of this is German-specific, but the German wrapper (Depot, Sparplan, Kapitalertragsteuer, Freistellungsauftrag) is.
What to do this week
- Open a free Depot with a low-cost broker, using your German tax ID and bank account, and set up a Freistellungsauftrag so your €1,000 annual allowance applies automatically.
- Start a modest ETF Sparplan into a broad, low-cost index fund to cost-average over time.
- Keep investing separate from your emergency cash buffer, and remember gains face roughly 25 percent Kapitalertragsteuer above the allowance.
