Two main trends can be observed in the market for private investors today. On the one hand, everyone is able to trade financial products easily and uncomplicatedly today. Online brokers enable even small investors to access the capital market quickly and easily.
On the other hand, an increasing environmental awareness has been observed among the population for several years. People want to act responsibly and sustainably. Labels for sustainable financial products help here. Investors can use the labels to identify financial products that meet the values and standards of the ESG criteria.
Shares are securitised holdings in companies that are listed on stock exchanges. Investors can trade these shares on stock exchanges. The sum of all shares of a company (mostly a public limited company in Germany) multiplied by the value of one share of this company results in the value of a company.
If you imagine a public listed company as a cake, this is roughly equivalent to a person buying a few crumbs of this cake when buying shares. Shareholders with a lot of shares then have a very large piece of this cake.
Shares can be used both as a long-term investment as well as for speculation.
How to invest
Shares can be purchased at the broker/bank of your choice or via online brokers (apps). Here you should pay particular attention to which fees (e.g. transaction costs) are charged.
In addition to shares or bonds, investors also have the option of acquiring a compilation of financial instruments without buying the financial products themselves. Accordingly, investors buy shares in a fund from a broker or credit institution, which corresponds to a defined compilation of securities (often shares). Funds that track stock indices, for example, are called ETFs (Exchange Traded Funds). In the case of a purchase of fund shares in relation to the above cake example, this corresponds to a purchase of a predetermined mixture of crumbs from different cakes.
Imaging a public listed company as a cake, this is roughly equivalent to a person purchasing a few crumbs of this cake when buying shares. Shareholders with a lot of shares then have a very large piece of this cake.
Funds and ETFs are particularly recommended for longer-term investments, as they normally have less risk.
How to invest
Funds are offered by fund companies and asset managers who manage (buy and sell) the investments according to their strategy. ETFs can be purchased from brokers (e.g. online brokers).
In the case of a bond, the buyer (creditor) acquires a security from the seller at a fair value based on a fixed amount (nominal value), which is repaid by the seller with interest after a certain period of time. Depending on the type of bond, the buyer receives an annual fixed interest payment on the nominal value (coupon bond) or receives the nominal value at maturity (zero bond).
However, there are also bonds that are defined without an annual payment and are only repaid at maturity (zero coupon bond). Everyone has done something similar when lending money to a friend. If this “friend” (e.g. states) issues bonds, they can thereby get money which they can invest.
Bonds (especially safe government bonds) are usually considered for long-term investments.
How to invest
Bonds can be purchased primarily from the broker/banks if you have a securities account with one of these institutions (banks and savings banks).