How to invest in German stocks

From Bayer to BMW, Germany is home to some of the biggest companies in the world. If you’re thinking of expanding your investment portfolio to the birthplace of Beethoven and Einstein, read on to find out how to go about it and what to bear in mind.

Can I invest in German stocks from the UK?

You can indeed. A number of UK brokers and investment platforms offer access to share dealing on the Frankfurt Stock Exchange, the largest of Germany’s stock exchanges. From there, you’ll be able to buy stocks in German firms such as financial firm Deutsche Bank or major car manufacturer Volkswagen. In our guide to share dealing platforms, we give details of which providers let you invest with which foreign exchanges.

How to invest in German stocks from the UK

1. Pick a share dealing platform. If you want to invest in specific German stocks, check that the ones you’re interested in buying are available. Check the tools on offer and the trading fees too.
2. Open an account. You’ll need to provide bank details and your national insurance number.
3. Deposit funds. In order to begin buying stocks, you’ll need to deposit money into your account – many sites allow payment by bank transfer, debit card or credit card.
4. Buy the German stocks. Use the platform or broker’s search function to find the specific stocks you want to buy.

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Which UK investment platforms let me trade in German stocks?

Not every UK investment platform lets you trade German stocks on the Frankfurt Stock Exchange, but there are enough to give you a choice. Options include:

• AJ Bell
• Barclays
• Halifax
• Hargreaves Lansdown
• Interactive Investor
• Saxo Markets
• Trading 212

How much does it cost to invest in German stocks?

When you’re buying and selling German stocks, there are a few investment fees you may encounter. Not every investment platform charges every type of fee. The main ones include:

• A platform fee. This may be levied by the platform provider to cover the cost of administering your account.
• Dealing commission (also known as a transaction fee). This is the cost that a platform charges to allow you to buy or sell shares.
• Foreign exchange fees. These are the fees the provider charges you to change your pounds to Euros (and back) so that you can buy and sell German stock.

How to find the best performing German stocks

There are a few ways to go about this. You can use the details of assets listed on the Frankfurt Stock Exchange to check how various stocks have been doing, though this may be a bit of a fiddle and it’s likely best if you already have specific stocks in mind. Alternatively, investment research and analysis websites often publish round-ups and recommendations of the best stocks to invest in within different regions and sectors, so a Google search should help.

You can also use any online tools on offer from your investment platform or tips from your broker.

When you review publications of the “best performing stocks”, make sure you take a look at how they’ve determined “best” when making a decision. It may or may not align with your goals. For example, for you the “best performing” stock might be one that delivers consistently solid returns and decent dividends, rather than one where performance has been stellar over the short-term but is more volatile over the long term.

How do German stocks perform?

As you can’t directly invest in Germany, we have used the German DAX index fund which comprises of 30 major German blue chip companies listed on the Frankfurt stock exchange. This allows you to get a good idea on how well the stock exchange is performing over time.

What are the alternatives to investing directly in German stocks?

There are a couple of alternatives to buying German stocks outright, which give you exposure to the German market in very different ways.

1. Buy German stock ETFs. ETFs – or exchange traded funds, to give them their full name – are effectively ready-made portfolios of multiple assets. Rather than having to buy each asset individually, investing in an ETF gives you exposure to a slice of each asset in one fell swoop. You can buy and sell ETFs on stock markets on the same way as you would buy and sell stocks and shares. For example, you could invest in an ETF that tracks the performance of the DAX, a stock market index that tracks the 30 major companies on the Frankfurt Stock Exchange.
2. Trade in derivatives. This is effectively where you “bet” on a company’s future performance, through spread betting or CFDs (contracts for difference). They work slightly differently, as we explain in our full guide to CFDs vs spread betting, but they both come with a high chance of losing money and should only be considered by experienced investors.

What should I consider when buying German stocks?

When you’re thinking about buying German stocks, most of the considerations are exactly the same as if you were buying UK stocks, with a couple of nuances thrown in. Some of the things to think about are:

• What’s your investment strategy? Your intended timelines and goals should influence both whether investing in German stocks is right for you, plus which specific stocks you choose. For example, with longer investment timescales you may be able to afford to buy higher-risk, potentially higher-reward assets.
• What’s your risk appetite? As with your investment strategy, this will impact whether you opt for shares in more stable, reliable companies, or in smaller start-ups with the potential for huge growth but also a higher risk of failure. Make sure you take this into account when you’re analysing various stocks’ performance.
• Are you happy to take on foreign exchange risk? Investing in stocks that are listed in foreign currencies, including German stocks, will mean (to a certain extent) putting yourself at the mercy of currency fluctuations, which may not work in your favour if the pound is weak.
• Do you have the time and inclination do research companies thoroughly? Investing directly in stocks involves more effort than investing in funds, for example, as you must do your due diligence on each individual company before investing. Plus you’ll need to monitor performance closely to decide the right time to sell if a stock no longer aligns with your strategy.

Pros and cons of investing in German stocks

Bottom line

Investing in German stocks could help diversify your investment portfolio and give you exposure to some major global companies. Not every investment platform lets you deal shares on the Frankfurt Stock Exchange, but enough do that you’ll have a decent choice. Compare the fees, information and features of each platform before making a decision. If you’re a novice investor, investing in ETFs that track the performance of a number of German stocks may be a simpler and lower-risk option than buying individual shares.

Frequently asked questions

• Do I have to pay UK tax on German stocks?

  If your returns from German stocks are enough to push you over your personal allowances, then yes – sorry. Even though the firms you invest in are based abroad, you are not (or at least, we assume not), so the money you make is still liable for UK tax. Taxes you may need to pay include capital gains tax and dividends tax. Take a look at our full guide on tax on overseas investments for more details.

• Is it better to invest in UK or German stocks?

  It doesn’t have to be a case of either/or. Most people who are new to share dealing will start out with UK stocks as it’s more of a known entity (and there are no currency fees to pay). But investing in German stocks too – or those from other countries – can help you build a more diverse investment portfolio and reduce your risk if the UK economy is struggling while other countries are doing OK.

• What are the trading hours for buying German shares?

  Standard trading hours for equities (shares) on the Frankfurt Stock Exchange are Monday to Friday from 8am until 10pm CET (which equates to 7am to 9pm in the UK). The exchange is closed on some public holidays, including Christmas and Easter.