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WWhat happens to the Germans? The country is experiencing the recession of the century and the central bank’s money printing machines are printing more than they have been printing since the 1920s. Economic uncertainty is omnipresent. But instead of stocking up to read some prophets of collapse, the Germans buy stocks. This is demonstrated by an analysis by ING Germany that WELT has received.
According to the figures, German savers bought more securities in the first quarter than they had in more than a decade. This is notable because financial markets experienced a historic drop in the first quarter and German citizens are generally seen as risk averse. Some experts are already talking about an investment revolution that has taken hold of Germany. And more and more people want to participate, as the development in the second half of the year shows.
“In the first half of the year we saw a boom in securities trading – our clients traded more than ever,” says Thomas Dwornitzak, director of savings and investment at ING Germany. The number of new deposit openings has also reached a record level. The ING study confirms this trend. According to this, the Germans packed almost 14 billion euros in shares in the first quarter, which was more than one in seven euros newly invested. In the same period of the previous year it was only 6.8 billion euros and, therefore, less than every twelfth euro of investment.
The new shared love is quite unique compared to Europe. Savers in the rest of the euro zone did not put fresh money into stocks during the turmoil in the first quarter.
And for the Germans, the willingness to take risks has paid off. Thanks to the purchase of shares, they were able to participate in the strong price recovery of the second quarter. The financial assets of the Germans are likely to have grown to a record value of 6.55 trillion euros in this period, after having fallen to 6.3 trillion in March. “Recently, we have seen more and more signs pointing to a change in investment behavior in Germany,” says Peter Barkow of Barkow Consulting, who prepared the data for the ING study, cautiously.
Source: WORLD infographic
Other experts are clearer. Martin Weber of the University of Mannheim, known in Germany as a professor of the stock market, speaks of a “sensational” development with regard to the investment behavior of Germans: “There is a dramatic rethinking. Young people, in particular, would conclude large-scale equity savings schemes. Scientists can follow the financial revolution in near real time because they have designed an investment fund themselves. El Arero, which according to scientific criteria distributes money between different asset classes and different stocks, has passed the one billion mark this year. “We are seeing a generation of savings plans grow,” says Weber.
Investors have used the pandemic to start
Other experts are also watching the development with fascination. “Is a new equity culture emerging in Germany?” Asks Michael Stappel, director of macroeconomics at DZ Bank. “The big flight of shares did not materialize this time, and the fall in prices in the first quarter was even used to buy shares and funds,” says the economist.
During the pandemic, many German citizens realized that there was nothing to be gained from interest-bearing investments for the foreseeable future. ” Many had literally expected lower prices, and when these were established, that was the trigger for an increase in purchases.
Source: WORLD infographic
Traditionally, local households haven’t invested much in securities, Stappel says. The latest survey by Deutsches Aktieninstitut (DAI) found that only 4.2 million German citizens are directly invested in shares, plus 5.5 million who own shares or mixed funds with shares in shares. In terms of total assets, equities only play a subordinate role.
More than a third are in life policies, in various forms of company pension plans and in Riester pensions. About 40 percent is in the account or kept under the pillow as cash. German citizens only invested every six euros in the stock market through shares or funds.
Even the Bundesbank recently gave the Germans bad marks for their conservative investment attitude in its monthly report. Other studies also show that German citizens are leaving a lot of money due to their aversion to stocks and have long been able to have a greater fortune, in other words, finally more financial freedom.
However, that is exactly what could change now. ING is not alone in reporting a sharp increase in customer interest. There is also a rush at other online banks. At S-Broker, the online broker for savings banks, stock transactions have soared 160 percent in the last twelve months. Trading in funds and ETFs, including savings plans, increased by a whopping 45 percent.
It is advisable to pay attention to diversification when investing. A well-known formula says that the ratio of stocks to other asset classes should be 100 minus age, ”says Maik Thielen, investment expert at S-Broker. That means, for example, that a 30-year-old can easily represent a 70 percent share of the market. According to this traditional rule, a 60-year-old could represent 40 percent of her wealth in stocks.
However, in times of zero interest rates, some experts recommend significantly higher equity stocks, because bonds are largely dismissed as a cushion due to the zero interest rate. “Seen over the past few years, it has been generally shown that the contribution from bank deposits steadily reduced actual total returns. Since the end of 2016 it has remained in the negative range ”, this is how the Bundesbankers describe the new world of investments in their current monthly report.
The influence of the new times on the mentality of Germans can also be seen in their reading preferences. The American investment classic “Rich Dad Poor Dad” can be found in the top 20 best-selling paperbacks. And in this book, author Robert Kiyosaki very emotionally describes how lack of knowledge of money and excessive aversion to risk lead to poverty. And not the crash.
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This text is from WELT AM SONNTAG. We are happy to take them home with you on a regular basis.
Source: Welt am Sonntag
