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German Stock Market: How to Trade and Invest in German Stocks

11 minutes
intermediate
Cristian Cochintu
Cristian Cochintu
14 February 2024

If you are looking to get involved in the German stock market, we explore numerous products and asset classes available for speculating on price movements or taking direct ownership.

Germany is viewed by many as an important and influential country, as it is home to dozens of the world's 500 largest publicly traded companies, which makes it an important country for international investors.

Interested in investing in Germany? Follow our quick guide below or read on to discover the exchanges, companies and indices that make up the German stock market.

How to Trade and Invest in German Stock Market – Quick Guide

Investing in Germany is relatively simple, even for foreign investors, and there are several ways you can get exposure to German stock market in your portfolio:

  • Trade Germany’s main stock market index, the DAX 40 (DE40).
  • Trade treasury issued by the German federal government, the GER10YBond.
  • Trade or buy German stocks listed on local or global stock exchanges.
  • Trade or buy exchange-traded funds (ETFs) that own German stocks.

   

Why Invest in the German Stock Market?

With industrial production as its driving force, the German economy is one of the largest economies in Europe, as well as worldwide. It is one of the highest exporters across the globe, mainly focusing on products such as machinery and electronics. The country is also one of the biggest producers of wind turbines and by the year 2030, it expects to reach its aim of generating 65% of its energy from renewables.

The country also has significant natural resource reserves, including uranium, timber, potash, nickel, copper, and natural gas. As for renewables, the country is one of the world's largest producers of wind turbines. In 2019, renewables eclipsed coal to become Germany's primary source of power. By 2030, the country plans to generate 65% of its energy from renewables.

Germany offers investors several benefits due to its economic power and stability. The benefits of investing in Germany include:

Strong economy: Germany has one of the most robust economies in the world, in terms of both size and exports. In 2020, the country's gross domestic product (GDP) reached $3.85 trillion.

European Union membership: Germany has benefited strongly from inclusion in the European Union, which has helped it become more competitive against other industrialized countries and other members of the Eurozone.

Workforce and taxes: Germany's workforce is highly educated and goes on strike less often than those of other EU countries. The country's unified tax code and business-friendly policies are also favorable for publicly traded companies.

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German stock exchanges

In total, Germany offers a choice of eight stock exchanges for traders. These include the Berlin Stock Exchange, Stuttgart Stock Exchange and the Munich Stock Exchange. However, Germany’s largest stock exchange is the Frankfurt Stock Exchange.

The Frankfurt Stock Exchange

The Frankfurt Stock Exchange (FRA) is Germany's largest stock exchange and the twelfth largest in the world by market cap. The Frankfurt Stock Exchange is valued at approximately $1.9 trillion and has longer trading hours than most, operating between 8am-8pm local trading time.

The FRA offers two trading venues: Xetra and Borse Frankfurt. Much of the exchange's profits come from Xetra, particularly through its trading system, which has allowed an influx of foreign investors to enter the exchange. Xetra offers trading of German stocks and exchange traded funds (ETFs). It affords increased flexibility for seeing order depth.  

Xetra was one of the first global electronic trading systems and now accounts for more than 90% of all stocks that trade on the FRA and 30% of all exchange traded funds in Europe. Xetra trades approximately 1,000 shares, 1,800 ETFs, exchange traded commodities (ETCs), and exchange traded notes (ETNs). It includes 170 participants from 16 different countries. It is open from 9 a.m. to 5:30 p.m.

Borse Frankfurt focuses on German and international securities. FRA employs specialists on the trading floor to tend to these trades. Borse Frankfurt has the widest range of securities, which includes 11,500 shares, 29,500 bonds, 1,500 ETFs, 2,800 funds, and 1.37 million securities and warrants. Borse Frankfurt is open from 8 a.m. to 8 p.m.

However, the German stock market an also be traded on through our online platform with CFDs or ownership, and these trading hours are displayed on the individual instrument pages for your chosen asset.  

Trade on over 100 assets within the German stock market.

      

German Stock Index

Traders can diversify their holdings and trade on share prices through a stock index as an alternative to trading on a single stock or several individual equities. The FRA posts several indices, including the DAX, the VDAX, and the Euro Stoxx 50.

DAX is the defining index for the German equity market, it serves as underlying for financial products (options, futures, ETFs, structured products) and for benchmarking purposes.

The DAX

The DAX is a German blue-chip stock market index that tracks the performance of the 40 largest companies trading on the Frankfurt Stock Exchange. Based on market capitalization, it was founded in 1988 and consists of the biggest and most actively traded companies.  

Financial reports, audits, and capital requirements are only a few of the requirements and conditions that companies must meet to be included as members of the DAX index. Each quarter, participants must regularly meet a stringent set of requirements to be listed on the index.  

In response to a November 2020 announcement by Deutsche Börse, the third quarter of 2021 saw the DAX grow to include 40 companies. The index weighting of an individual share is capped at 10%. The largest by market cap are SAP, Siemens, and Airbus. Adidas, BMW, Volkswagen, and other top names in the sector are among the companies that make up the DAX.

If you are looking to trade DAX 40 to speculate on, or hedge against, you could consider contracts for difference (CFDs). Unlike futures and options, they give you the flexibility to take a long or short position on an asset. If you expect an asset price to go up you can open a long position, but if you expect it to fall you can take a short position to try to profit from a decline in the price.  

Explore our Germany 40 CFDs

On our trading platform we offer a derivative version of the DAX index to trade called the Germany 40. You can view our Germany 40 live price chart, seamlessly open and close trades, track your progress and set up alerts.

    DAX 40 Forecast & Price Predictions

German Stocks

Traders view the German stock market as highly influential, due to its strong reputation and numerous industry-leading companies. There are a wide range of industries represented in the German stock market. These include chemical, retail, and financial services industries.

While there's turmoil in the German economy, the brave might be searching for some best German stocks.    

Some of the best German Stocks  

For conservative investors who want blue chip quality European stocks, DAX 40 components can be one of the best places to start looking. Below are some examples of top German stocks by market capitalisation, according to their industry.

German stocks can help you diversify your exposure beyond US stocks by offering potentially different market dynamics, industry trends, and currency exposure. Additionally, Germany's participation in the EU gives it access to a sizable consumer market and the benefits of economic integration with other European countries.

German companies frequently have a strong dividend culture, which attracts income-oriented investors. A developed regulatory environment for financial markets and strong shareholder rights are among the policies that favor investors and can provide them with transparency and protection.

Explore our German stocks

Our trading platform includes of a variety of useful features for share trading, such as the analysis, consensus, and sentiment from Tip Ranks, pattern recognition from Trading Central, and advanced charts from Trading View.

       How to trade stocks

German ETFs

The easiest way to invest in Germany is through exchange-traded funds (ETFs) that consist of a compilation of assets, such as shares and bonds. These securities are listed in general on the U.S. stock exchanges, and they offer diverse exposure to companies domiciled within the country.

ETFs commonly track stock indices, such as the Germany 40, which can be traded like any other stock.

Some of the best German ETFs

The most popular ETF used to invest in Germany is the iShares MSCI Germany Index Fund (EWG), which is managed by BlackRock's iShares group. Using the popular Germany MSCI Index, the fund holds more than 60 stocks across more than 10 industries, with an expense ratio of 0.51% and a net asset value around $1 billion as of the beginning of 2024.  

Here are some more popular ETF options to invest in Germany:

  • Lyxor DAX (DR) UCITS ETF
  • WisdomTree Germany Hedged Equity ETF (DXGE)
  • iShares Currency Hedged MSCI Germany ETF (HEWG)
  • iShares MSCI Germany Small-Cap ETF (EWGS)
  • Global X DAX Germany ETF (DAX)

When investing in international ETFs, traders should be cognizant of the expense ratio, liquidity, tracking error, and the underlying index.

Investing in German ETFs offers several advantages. Firstly, it provides diversification by allowing investors to gain exposure to a wide range of German stocks or bonds in a single investment. This diversification can help reduce the overall risk of an investment portfolio.

Secondly, ETFs are known for their transparency and liquidity, allowing investors to easily buy and sell shares throughout the trading day. Furthermore, ETFs often have lower expense ratios compared to actively managed funds, making them cost-effective investment options.

Explore our European ETFs

Our WebTrader platform and app offers several ETFs that track the performance of the underlying Germany 40 index that you can trade on via CFDs or buy.  

           How to trade ETFs

German Bund

German bonds, also known as Bunds, are government bonds issued by the Federal Republic of Germany. These bonds are considered one of the safest financial assets in the world due to Germany's economic strength and its debt repayment history.

In times of economic uncertainty or crisis, investors tend to seek refuge in German bonds due to their safe haven status.

German Bond 10 YR

Germany's 10-year bond yield is the benchmark for the single-currency bloc. Bunds are highly liquid debt securities that are eligible to be used as insurance reserves for trusts. Accepted by the European Central Bank (ECB) as collateral for credit operations, bunds are auctioned in the primary market at volumes of more than €1 billion.

Bunds account for about 50% of the German government's outstanding debt, underscoring their importance in government funding. By issuing bunds and other long-term securities, German authorities obtain a more stable source of financing, thereby reducing the need to frequently roll over debt.

German bonds are a key benchmark in debt markets in Europe and have a significant impact on interest rates throughout the euro region. Changes in German bond yields may influence economic conditions in the euro zone.

Explore our Euro Bund

On our trading platform, we offer a derivative version of the Euro Bund to trade called the GER10YBond. You can view our GER10YBond, seamlessly open and close trades, track your progress, and set up alerts.

         How to trade bonds

What are the risks of investing in or trading German stock market?

There are potential opportunities for investors and traders to profit from investing in some of Europe’s largest companies listed on Germany’s stock market. However, there are also risks that you should be aware of before investing in the DAX or individual stocks.

Some of the largest stocks in the DAX are energy-intensive companies in industries such as automotive, engineering and materials, including Volkswagen, BMW (BMW) and Bayer (BAYN). Germany is Europe’s largest importer of oil from Russia and the ongoing geopolitical tensions could deepen the energy crisis, particularly heading into winter.

Germany is also the world’s third largest exporter, meaning that a global economic slowdown would have a significant impact on demand for its goods. That in turn is likely to weigh on the revenues and share prices of the companies listed on Germany’s stock exchange.

Rising interest rates in Europe, the US and elsewhere could further weigh on German stocks as investors sell off stocks in favour of alternative investments such as fixed-income assets. And as an EU member state, Germany is at risk from contagion from debt and other economic issues in other countries.

Trade the German stock market with CAPEX.com

Trading and investing in Germany stocks, ETFs and bunds allows global investors to put their money into Germany's largest companies and other assets. CFD trading and investing have their benefits and risks. CFD trading is the easiest way get direct exposure to German companies, while investing allow indirect ownership of stock. The main difference between CFDs and investing is that CFDs are leveraged, while investing in shares is non-leveraged.

With CFDs, you’ll be speculating on price movements – without taking ownership – and putting a margin amount down as leverage to open your position. This increases both profits and losses.

When investing in stocks (also known as share dealing or share trading) you’re taking direct ownership of the asset, for example company shares. You’ll need the full value of the position upfront.

Investors should make themselves aware of risks of losing money, costs, tax implications, and other factors. You should do your own research to take an informed view of the company and the stock’s potential.

Remember, you can trade derivatives with us via CFDs, and we also offer investing. We offer CFD trading on shares, indices, commodities, bonds, cryptos, forex, futures and investing in thousands of stocks and ETFs listed on 10 global major exchanges.

Explore our German assets

Seamlessly open and close trades, track your progress and set up alerts.

   

Free Resources

Before you start trading the German stock market, you should consider using the educational resources we offer, like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more-informed investment decisions.  

Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for stock investors who are looking to make a transition to leveraged trading.

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Cristian Cochintu
Cristian Cochintu
financial_writer

Cristian Cochintu writes about trading and investing for CAPEX.com. Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.