5 reasons why Germans don’t invest in stocks – but why they should!

Wall St. Nerd


Updated on

January 14, 2023


German investors are rather cautious investors. This does not apply to the entire German population of course, but nevertheless, it is a fact that on average, fewer people in Germany make their investments in securities than people in other countries.


5 reasons why Germans don’t invest in stocks 

Investing could be so easy thanks to a smartphone app, and yet many Germans shy away from investing in stocks. That's why we shouldn't be hung up on the reasons why not to invest.

Reason No. 1: Fear of risk

There is a widespread belief among the German population that investing in stocks is a real game of chance and can best be compared to gambling. Thus, for many people, the stock market bears great similarities to a casino. Investing in stocks is equated here with betting in a casino.

For this type of non-investor, the fear of losing the investment due to uncontrollable factors is deep-seated. The way many non-investors view the stock market also contributes to this. They do not differentiate between the various investment opportunities.

Indeed, it makes a clear difference whether one decides to invest in securities or funds for the long term, or whether the investment is short-term speculation and day trading. It is important to know here that it is precisely through a longer investment period and broad diversification that one can drastically reduce the risk of loss. For non-investors, however, this difference obviously does not matter.

Nevertheless, one should invest in shares. Here, one should first clarify whether one belongs to a type of investor who is prepared to take risks or someone who would rather minimise the risk.

In any case, a broad diversification always plays an important role. A broad diversification also provides a certain degree of protection against inflation. Possible forms of investment here would be, for example, investment funds and stocks.

Investment funds are particularly suitable for investors who would like to avoid risk. Compared to individual stocks, investors have already achieved a broad diversification with small investments. Should a company suddenly show weaknesses, the price gains of the other securities can compensate for these stocks.

Reason No. 2: It seems impossible to find the right entry point

As mentioned previously, many Germans do not really know the difference between short- and long-term investing. That is why there is a completely distorted idea of what skills one should have when investing in the first place.

Studies show that 61 percent of non-investors are firmly convinced that you can only be successful on the stock market if you know the right time to buy and sell. Strictly speaking, no one can predict when the right time will come.

It immediately becomes clear that most Germans associate a securities investment only with short-term speculation. For many people, the stock market looks like this: Someone sits in front of multiple screens, incessantly observing the different price trends, waiting for the exact second when the right purchase is made.

With a long-term investment strategy, on the other hand, it is not necessarily a matter of the right time to enter the market. For example, if you opt for ETF savings plans, you invest regularly over a longer period. The level of the share price does not play an important role. Short-term price slumps can simply be sat out with a long-term investment strategy.

Reason No. 3: Doubts and lack of knowledge about financial products

It has certainly become clear that most people have a very limited knowledge regarding the financial products offered by the stock market. The vast majority, however, would like to understand the financial product they are investing in in detail.

This is, of course, a very healthy approach, but one should be aware that most losses on the stock exchange result from risk-loving investors speculating with financial products. Often, however, they do not understand how they work sufficiently or at all. Even stock market gurus recommend time and again that you should only invest in things you understand.

The fact is, the necessary knowledge is indeed lacking here, but little or no effort is made to acquire this knowledge. You do not have to be a stock market guru to do this, you just have to take the help of experts.

Reason No.4: Fees and costs trigger fear

Many Germans have an enormous fear of hidden fees and costs. Securities simply seem to be completely non-transparent to many, and yet there is a great desire for there to be sufficient transparency in any investment. Minimum terms as well as notice periods seem to be the biggest hurdle for Germans. However, precisely these two factors are not relevant at all for trading in securities. But the second factor is the costs, which seem completely opaque to many people.

Actually, this is not a problem at all and it is absolutely transparent. To trade in securities, you first have to open a securities account. Costs are incurred for each order. However, a closer look at the numerous online brokers shows that you are not charged any custody account fees at all here.

Regarding the costs, for example the order fees or the costs for an ETF savings plan, a lot has changed in the recent years.

But here, too, it is only necessary to consult a comparison portal because here the different brokers are shown exactly with their costs and fees, so that the models are ultimately even very transparent, provided one takes the trouble to invest a little time here and compare at leisure.

Reason No. 5: People don't talk about money

Unfortunately, the topic of money is still a taboo subject in this country. Many Germans do not want to talk about financial matters at any price. This already concerns one's own income, personal assets and extends to investments and asset savings plans. No one normally likes to admit that they are not in an outstanding financial position. Our culture of envy could be to blame for this (Yes, I am German, but with a different mind-set).

As a result, many Germans are almost resistant to advice when it comes to investment counselling. Yet a simple information session could provide a great deal of clarification and show that investing in the stock market is certainly promising, and also profitable.

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Hi, I'm Alexander Kelm.

Serial entrepreneur, value investor and angel investor. Founder of Wall St. Nerd. Join me here on wallstnerd.com to learn how to read financial statements, find healthy companies, and invest your money wisely.

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