Ironically, the global crisis year 2020 is likely to have triggered the biggest rush by private investors on the stock exchanges in a long time. Especially in the spring, banks and brokers in Germany reported record numbers of transactions and customers who opened new depots. ING alone, the market leader in direct banks in Germany, recorded 210,000 new securities account openings in the first half of the year, which is more than in the whole of 2019. The number of securities purchases and sales also rose sharply. “In 2019 as a whole, the number was 11.5 million,” says Thomas Dwornitzak, Head of Saving and Investing ING Germany, ntv.de in December. “Today the number is almost twice as many trades compared to the previous year.”
Other direct banks and online brokers report a similar influx of new customers. In addition, there are completely new players: the so-called smartphone or neo brokers. Trade Republic alone, probably the largest among these new providers in Germany, is likely to have more than quintupled its number of users to around 500,000 within this year, according to estimates by the experts at finanz-szene.de – and that without the established institutes having to record customer losses . Complete figures for the entire year are not yet available, but the various reports from banks and brokers suggest that well over a million people in Germany have ventured onto the stock exchange for the first time. Most of them, right at the time the stock markets had slumped dramatically in the spring.
This boom surprised even experts. “It was surprising that so many people got on board, especially after the prices had fallen so sharply. But that gave them exactly the right feel, ”says Uta-Bettina von Altenbockum, spokeswoman for the Deutsches Aktieninstitut, which is committed to strengthening the equity culture, which is traditionally not very pronounced in Germany.
Didn’t get to play
What, according to an investigation by the banking initiative “Pro Share” from the summer, drove mostly young investors to the stock market en masse at the time when the Corona crisis hit the financial markets, ultimately remains unclear. It is speculated that many young people out of boredom and curiosity began to gamble with stocks on their phones during the first lockdown in the spring. Just like online games recorded high access numbers. However, the term gambling does not apply to the behavior of most of these new stock market investors – at least in Germany.
Kim is one of the private investors who did not buy a security for the very first time, but used the corona crash to “really get into the stock market”. The social pedagogue from Berlin had previously looked for ways of investing savings that he had left over from part-time jobs while he was studying. “For a long time, stocks and stock exchanges were not an issue in my environment,” he reports to ntv.de. But Kim had decided to invest the money saved and other monthly amounts long-term. The more he looked at the subject, the more certain he was that stocks offered him the best risk / return ratio in the long run. When the prices collapsed massively in the spring, he was already following the stock market news closely. “I thought to myself: This is my big entry opportunity,” says Kim. In several steps, he invested the majority of what he had until then still held as cash in funds and a few individual stocks.
Just like he thought and acted in the past year, many savers who have already dealt with the topic of financial investments but had not yet made the move to the stock exchange. “We explain the enormous interest in securities on the one hand with the volatility in the markets and on the other hand with the low interest rate environment. Many customers have used the price low as an entry opportunity and discovered securities trading in times of low-interest savings products as a useful addition to ‘classic savings’ ”, says Dwornitzak. Only a minority use their new depots for gaming. “They invest most of their investments in stocks, then a lot in ETFs and other funds,” says Matthias Hach, Head of Marketing, Digital Banking & Brokerage at Commerzbank, who is responsible for the direct bank Comdirect and the online broker Onvista. “Riskier leveraged products only play a subordinate role in their depots.”
The corona small investor boom is still too fresh for a final assessment, but there are indications that it could turn out to be more sustainable than previous high phases in German equity interest. “Many have now owned shares for the first time in nine months. How many of them will stay with us in the long term remains to be seen, ”says von Altenbockum. But: “I am optimistic that many young people are there and apparently not only play, but are interested in long-term asset accumulation and retirement provision.”
Hach sees a “very different picture than around the beginning of the 2000s”. In an interview with ntv.de, he says: “The behavior of these new investors shows that they are much more informed and more practiced than was the case with newcomers to the stock exchange at other times. We see that these new customers diversify their investments, hedge their positions and even realize part of their profits once the prices have risen sharply. “
“Tonality is not ecstatic”
This means that investor behavior in Germany currently differs not only from previous hype phases, but also from the current situation in the USA. Millions of young new exchange traders not only trade shares there, but also sometimes risky warrants and other financial derivatives using the popular Robin Hood trading app. This not only led to strange phenomena, such as the occasional rocket-like rise in the share price of the insolvent car rental company Hertz, but also to financial ruin for some inexperienced investors. The suicide of a young Robin Hood user caused an outcry, whose account showed a high six-figure minus amount after a failed financial bet.
However, there is no comparable stock market hype as in the USA, where in forums and social media supposed experts promise investors infinitely rising prices and tempt them to engage in increasingly risky speculative transactions. “The tonality in the media, the stock market letters and forums is not ecstatic,” praised Commerzbank board member Hach. In addition, private investors in Germany are well protected. “A lot has happened in terms of investor protection in recent years. In the worst case scenario, small investors in Germany can lose the amount they invested, but no more. At least if they haven’t taken out a loan. “
Entry into the crisis has paid off for newcomer Kim. At the end of the year, his portfolio was clearly in the black. Despite some mistakes, such as the purchase of Wirecard shares, shortly before the collapse of the scandal group. The social worker doesn’t just want to invest his wealth in stocks for the long term. In the meantime, he has also been able to inspire siblings and friends who were completely alien to the stock market until recently.
The article first appeared on ntv.de.