Buying index funds in Germany

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I have historically invested in funds. So far, with the exception of the internet bubble I have done reasonbly ok and have managed to take chunks of money out before the market crashed. Looking at the markets now I think we are at or close to the bottom so am looking to get back in. I want to invest in funds but don't want to pay the entry fees so I am looking at index funds - are there any companies which offer these in Germany. Clearly investing is a long term objective but I want the option to dip in and out. I am NOT interested in investing in individual shares.

 

Appreciate any recommendations.

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Index funds are Indexfonds in German, and I think some companies offer them. But you can also buy index tracking stocks such as SPDRs through online services such as www.etrade.de etc. Now is a great time to buy.

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You don't make it clear whether your brokerage accounts are in Europe, the US or elsewhere, but I'm pretty sure you can buy these anywhere:

 

Vanguard Index 500.

 

Vanguard Euro ETF.

 

Great expense ratios. No load. Daily pricing. ETF liquidity.

 

Disclaimer: I hold these funds personally, but have no vested commercial interest in recommending them.

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What you are looking for are ETFs. There are a couple of houses/investment companies who are specialized in offering a wide variety of ETFs is LYXOR - check them out.

Even though, the downside is that an ETF has no room to maneuvre, the have to go up and down exactly with the index they are built after, therefore I would always recommend a mixture of really well-managed investments funds who have a solid track record of beating the relevant indexes and ETFs

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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for some reason, ETFs have become a synonym for Index-Fonds...

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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An index fund is generally a mutual fund that owns the underlying shares has its NAV set at the close of trading.

 

An ETF has intraday pricing.

 

All index funds are mutual funds, but only some index funds are ETFs.

 

Some mutual funds are not available to foreign investors, partly due to regulation and because many fund managers don't like to have to deal with the annoyance of having to rebalance due to cash in/outflows when people in other time zones try to trade based upon how futures are trading (which is also why many global mutual funds have limits on holding periods and prohibitive redemption fees/restrictions). ETFs generally are.

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therefore I would always recommend a mixture of really well-managed investments funds who have a solid track record of beating the relevant indexes and ETFs

Except that there seems to be no empirical possibility of distinguishing "superior skill" from "pure luck".

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Brining the topic back up.

Anyone can recommend a good low risk and cheap investment company? (no 50 euros monthly fee)

are the comissions here of buying for example Vanguard ETF from a german company equals the real Vanguard conditions(low manage fee) or there are some claws to investing from germany? Any american company would open an account for germans?

Another thing would be english interface.

 

Cheers

YS

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Try the Deutsche Börse website:

 

http://www.boerse-frankfurt.de/DE/index.aspx?pageID=123

 

(lots of ETFs to choose from, website available in German and English)

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@americaninberlin - I use onvista.de (germany only unfortunately) for trading. But I've found ishares to be some of the cheapest options for indexing. you can visit ishares.de and they have english version of their website.

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The old ones are best.

 

My shares, cash, funds and stuff (portfolio sounds too posh for such a pittance), are 90% UK-based. Some sort of diversifying would be nice.

 

Seeing as I live in Germany and can sort of speak the language, there’s no reason I can’t look at Indexfonds, amongst other things.

 

So I was surprised to see similarities between the UK and Germany. For example, Morning Star has a German website, and even a lot of the terminology is similar, including my favourite TER (Total Expense Ratio).

 

Quickly comparing the equivalent pages (below) of the Morning Star websites, the German site seems to list a few hundred more XETRA ETFs than the UK LSE ETFs, they are generally given higher MS ratings (for whatever that’s worth) and the TERs seem lower.

 

http://tools.morningstar.co.uk/uk/etfquickrank/default.aspx?Site=UK&Universe=ETALL%24%24ALL&LanguageId=en-GB

 

http://tools.morningstar.de/de/etfquickrank/default.aspx?Site=DE&Universe=ETALL%24%24ALL&LanguageId=de-DE

 

In fact (edit - when the MS ratings are filtered), the first fund listed, Db X-Trackers II Iboxx Eur Germany Covered, has a 0.15% TER. I know that’s a tracker fund, but UK companies want 0.3% to 1% for a similar fund.

 

First impressions are it’s cheaper to buy a Fund or ETF in Germany than the UK. There’s always a “but”, so are there any disadvantages, e.g. taxes, buying in Germany?

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Have a word with Starshollow ( Patrick Ott ), who advertises on Toytown and is an expert contributor re your issue .

I am a professional independent insurance broker and authorised advertiser. Contact me.
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hodd - I've not been in the UK market for some time and so cannot compare. However I have a German tracker that has done well for me in recent years within a wider portfolio and that ,15% charge is right I think. With an annual mgt fee on top too of course. I manage my depot on-line and it is very easy, just as in the UK, so you can see a ton of product info and past performance etc, and set up plans and make one-off purchases / sales etc. There is a small purchase tax and now of course we will pay 25% capital gain tax on disposal. My depot generates my year-end tax reporting figures, so that bit is easy.

 

(I very much go on trends and general strategic aims for returns: I do not analyse fees much because the size of the cake and also having a balanced portfolio that is on strategy matters to me more than the exact size of my slice).

 

The main fund supermarkets operate in multiple territories. Fidelity is here (don't use it, did in the UK). My bank's associate offers all of the well-known names (eg. Aberdeen) plus some we probably might not have come across in the UK.

 

Two other points. You might not have a choice about which system you use. You tend to have to be resident (anti-money laundering). Second, on "diversifying", we tend to be told to invest in the economy that supports us first. Then go "abroad". For me, that first place is Germany now. It was the UK for a long time - but not now. Strategically, the UK is just another foreign territory now (and there are plenty of those that look a better bet imho). For my strategy, I try not to treat it as any different just because it is where I am from and I'd not have 90% of my holding in a foreign nation unless I was feeling absurdly confident in terms of taking on risk ;) .

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Thanks Swimmer

 

25% Capital Gains Tax :angry:

 

By the way, I wouldn't dismiss fees or TERs likely. Some of my managed UK funds have 2.5% TERs, which compounds and takes a lot of money away from me, for not much in return.

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Strategically, the UK is just another foreign territory now (and there are plenty of those that look a better bet imho)

 

Agreed. That's why my 90% is a bit crazy. :)

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What you also have to remember is that that 25% CGT on disposal of purchases made since 2009 is a straightforward liability as a German resident. Applies to all, no matter how we bought them or where and so on (ie. any ones you bought anywhere, not just ones bought through a German-based system or whatever). So not relevant to where how / where we source them - liability is the same.

 

However, if you are thinking of selling some of that UK hoard to balance your portfolio, that is a point to consider. Before 2009, then no CGT. But any "re-investment" now would attract it. I know quite a few residents who refuse to sell old holdings for that reason (even illogically when not making much now).

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if you buy ETFs, it doesn't matter much if you get them in London or Frankfurt. the typical structure of a European ETF is that the actual fund is based in one country, often Ireland or Luxembourg, and then listed on various European exchanges. it's the same product, just a different listing. the product provider may not list everything they make everywhere, but there's bound to be at least one of every common flavour available on any exchange.

 

tax liability is the same, as swimmer said, but there's in a slight advantage to using a non-German broker as then the tax is due the following year after you report it, while a local broker pays the dues direct to the Finanzamt, so the tax liability can stay invested longer abroad. it's where the broker is that matters, not where the investment is (London shares via German broker = taxed at source, Frankfurt shares via London broker = deferred).

 

also German tax law rules being bureaucratic, they are in effect less strict than the UK, e.g. bed-and-breakfast is OK I'm told, so it can be possible to defer the tax liability, for example to a year where you have a low income, as you pay at your marginal rate when it is below 25%.

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