Where to open an ETF account?
Investments in ETFs are also becoming increasingly popular in Germany, which is why the question “Where to open an ETF custody account? In the following, we will also discuss what ETFs are all about and what advantages these financial products have for investors. The abbreviation ETF stands for “exchange traded funds”, which is usually translated as “exchange traded index funds”. Unlike a conventional fund, ETFs can be traded directly through the exchange and therefore do not require the assistance of the fund company issuing the fund. Usually the term ETF is also used for “passively” traded index funds.
In this case, the form is not actively managed by a fund manager, but rather the composition of a stock index is “copied” in order to be able to reflect the performance of the index as accurately as possible. In our experience, the DAX and the Dow Jones Index, for example, are at the top of the list. The main advantage of an ETF is that the fees are usually much lower than those of an actively managed fund. In addition, ETFs usually offer extremely good performance.
Where to open an ETF account? A securities account for trading with ETFs can be opened with the following providers:
- Banks and savings banks
- Direct banks and online brokers
- Purchase of an actively managed fund, which is not composed of individual shares but of several ETF
- Digital Asset Managers
- Use of a CFD Broker
If you want to, you can simply go to your bank or savings bank in the branch and ask your advisor to buy an ETF for you. However, experience shows that in this case the fees are very high. This concerns on the one hand the order fees for buying and selling ETF. On the other hand, it is unfortunately also common that the customer is charged high fees for the administration of the custody account.
Where to open a custody account ETF: For this reason it is often advisable to open a custody account with a direct bank or an online broker. In our experience, the costs and fees are usually much lower with these providers. For example, there are often no fees at all for maintaining a securities account. Those who wish to do so can not only trade ETFs at low prices with these providers, but also buy and sell individual shares. However, we generally recommend investing in a stock index rather than in just a few companies.
Because in this way, the portfolio is diversified and you can diversify your portfolio. For example, it is quite unlikely that all 30 companies listed in the Dow Jones Index will suddenly see their profits plummet and thus probably also their share prices. However, this can happen at any time for a single share. It is therefore even better to invest in the American S&P 500 Index, for example. This index consists not only of 30 shares, but of around 500 different shares.
Another option for investing in ETFs is to buy an actively managed fund, which in turn invests in various ETFs. A fund manager is responsible for selecting the ETF. He also decides on the weighting to be applied to the respective ETF. However, since the manager only has to decide between different ETFs and not between individual shares, the effort required is much lower compared to a “normal” equity fund. This is also reflected in the lower costs.
Where to open an ETF? Another option is to open an account with a digital asset manager. These act in a similar way to the actively managed funds just mentioned: therefore no investment is made in the shares of individual companies. Instead, the securities account consists of several ETFs. The exact composition and weighting are usually determined by computers and special algorithms. This should ultimately improve the results.
In addition, the use of computers has the advantage that costs can be further reduced. In our experience, many digital asset managers also have very good and helpful internet services. As an investor, you can often find out very quickly how willing you are to take risks and what return you can achieve with your investments in ETFs. The planned duration of the investment is also important in this context. In contrast to online brokers, most digital asset managers do not offer the possibility of trading themselves.
In order to trade really actively, it is advisable to open an account with a CFD broker. Because more and more providers offer trading with ETF nowadays. CFDs are often used to trade stock indices and currency pairs. Trading with CFDs offers the advantage of using leverage, for example. Through this the purchasing power of the available capital can be significantly increased. Here is an example: If the DAX is at 12,000 points, trading the German leading index requires 12,000 € on the trading account if you trade without leverage. With European brokers today one has the possibility to use a leverage of up to 1 to 20 when trading with stock indices. In this case the necessary amount of capital is reduced to only 600 €. Trading CFDs is therefore also possible with little capital. Thus, with many brokers, an amount of 100 or 200 € is already sufficient to open a trading account.
In addition, many brokers offer a free demo account to test trading without risk. So the trading on the demo account does not take place with real money. Instead, you can use virtual capital to train the trading. According to our experience, this sum amounts to 10.000 € with many brokers use. This virtual amount can be used to train CFD trading and investing in ETF.
Where to open an ETF account: In order to learn how to trade, many brokers offer helpful training. These will introduce you to trading CFDs and explain, for example, how to use the trading platform. In webinars you also have the opportunity to learn about successful strategies. Ideally, you can try these strategies yourself on a demo account. Once you have gained enough experience on the demo account, you can continue trading CFDs and investing in ETFs on a live account with real money. In order to find a good CFD broker, it is advisable to use our broker comparison.