Michael Schacht, 70, is a typical German saver. Risk averse, the owner of the clothing store kept the equivalent of $ 300,000 in a local bank in a small town near Hamburg.
Then, earlier this year, Mr Schacht’s bank told him they wanted to charge him a negative interest rate of 0.5% to keep his money.
Furious, Mr. Schacht did something he had never considered: he put everything on the market. Its portfolio includes investments in stocks and bonds of companies from Europe and elsewhere via funds, as well as gold and silver.
“I don’t want to make a lot of money, I just want a low risk investment that offers a reasonable return on capital, like 2%, 4%,” Schacht said. “It has always been realistic in the past.”
More Germans entered the stock market for the first time during the pandemic than ever since the dot-com boom. Deutsches Aktieninstitut, an association of the financial industry, estimates that 2.7 million people in Germany started owning shares directly or through funds last year, bringing the total of investors to 12.4 million, up 28% compared to 2019.
Yet less than 18% of Germans aged 14 and over own stocks, equity funds or exchange-traded funds. In the United States, 53% of families own stocks directly or indirectly, according to the Federal Reserve. If more savers in Europe’s largest economy turn to equities, it could spill over into the market.
The Germans have long resisted direct investment in stocks and other risky assets, preferring the safety of guaranteed bank deposits. Most Germans also rely on generous public pensions to fund their pensions. Some were burned by a similar boom in stocks before dot-com collapsed.
But the distressing reality of negative rates has changed the equation. Also playing a role in getting Germans to invest: increased savings during the coronavirus pandemic, free time resulting from lockdowns and a young population excited by the boom in American tech stocks.
“My new buyers are buyers of US stocks”, criticizes Amazon.com Inc., Tesla Inc.
and other tech giants, said Erik Podzuweit, founder and co-managing director of Scalable Capital, a Munich-based online brokerage.
Mr Podzuweit said that while in the past German investors have shown a strong preference for domestic companies, more than 60% of the stocks and ETFs currently traded on his platform are based in the United States. During the GameStop Corp.
frenzy in January, 3% of its users were trading shares of the US company and were very active.
Alexander Hösle, a 29-year-old financial controller in Munich, grew up with his parents telling him to be conservative with his money. In February of last year, he used Scalable to invest almost $ 10,000, or 10% of his savings. He initially hung on to ETFs. He later took shares in Apple Inc.,
Tesla, German software publisher SAP SE SAP 0.77%
and Deutsche Post AG
He checks his wallet twice a week. Its next potential investment is in German travel operator TUI AG
, which Hösle says could win when the pandemic subsides and tourism picks up in Europe.
“The reality is that there are no better alternatives for your money,” Hösle said.
“In my 22 year career, I have never seen anything like it.
Like Robinhood Markets Inc. in the United States, online brokers attract investors with free trades. Scalable, in operation since 2016, offers various package options that include free transactions for members who pay 36 euros per year (equivalent to $ 43) and a per transaction fee of 99 European cents for non-members. In banks, the fees can be 10 € per transaction.
Since mid-2020, Scalable’s active users and the amount they invest have doubled. The broker has more than 250,000 clients and nearly € 4 billion in assets under management. Most scalable first-time clients are between 20 and 30 years old.
So far, new entrants to the market have had only good times. The DAX index, Germany’s local benchmark, is up 37% from a year ago, including dividends. This exceeded the total return of the S&P 500, which for German investors is up 30% taking into account the fluctuation of the euro.
Banks are also trying to get customers to move their cash from deposits to investments, while keeping it within the same institution. German Bank AG
said its clients transferred € 5 billion from bank deposits to investment products last year.
Mr. Schacht, the owner of the clothing store, put his savings with FAM Frankfurt Asset Management AG, a boutique company. FAM co-founder and chief investment officer Ottmar Wolf said the two-year company’s assets under management increased 25% in the past 12 months as high net worth and retail clients fled negative rates on their accounts banking.
“In my 22 year career, I have never seen anything like it,” said Wolf.
—Tom Fairless contributed to this article.
Write to Patricia Kowsmann at [email protected]
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