10 Sep 2024
The stock market in Germany is quite bustling and trending amongst the general public. So you’ll find this quite different from the general attitude of people towards the stock market in Pakistan. Many Pakistanis who migrate to Germany for studies or work look for side hustles to earn extra money. This is where stock trading comes in. Expats usually earn enough through trading stocks to send money online to Pakistan from Germany.
While it is a great way to earn money and somewhat protect it from inflation, trading stocks, bonds, other securities, and commodities can be pretty intimidating experience. Here are the basics of trading and the stock market in Germany you need to know before you begin trading:
If you are entirely new to the “stock market” world, you might struggle to understand its terms. Here’s a few of them:
Stocks are tiny to huge pieces of cake, as if the cake were a company. You become a company owner or stakeholder when you buy a piece of that cake. The fun part is that as an “owner,” you get to keep some portion of the profits earned by that company. The portion depends on how large your share is.
Stocks aren’t of just one type, though. Preferred shares, for example, have a fixed return rate regardless of whether a company gains profit or loss. Return on common shares, however, depends on the company’s profit or loss. One thing about trading is the higher the risk, the higher the return. So it is a game of how much risk you are willing to take, i.e., your risk appetite!
Buying and selling individual stocks, i.e., of one particular company, can be risky, as when the company suffers a loss, so do you. This is why beginners are usually advised to trade in funds. A fund is like a pool of securities from various companies. Even if one company suffers loss, others will probably not, unless they’re from the same or connected industries. It’s all about not putting all your eggs in one basket, i.e., risk diversification!
When you choose a fund to invest in, you’ll need to pay some administrative and other expense fees, usually called an Expense Ratio. It is ideal for beginners to choose funds with a less than 1% expense ratio to prevent them from eating up their profit. This is where Indices come in. Since indices have a fixed set of securities instead of actively hand-picked securities by experts, the expense ratio is usually below 1%.
To make it as simple as possible, remember that the German stock market is centered around the Frankfurt Stock Exchange (FSE), which Deutsche Borse runs. The FSE is home to all kinds of individual stocks, commodities, options, futures and other securities, but for now, let’s not dive down that rabbit hole.
The highlight is that the FSE has an index called “DAX.” DAX consists of 40 top German blue-chip companies, including some international giants like SAP, Volkswagen and Siemens. Consequently, DAX is considered a reliable barometer for assessing the performance of the German economy. If you decide to invest in DAX, you can earn profit and send money to Pakistan from Germany to support your family back home. Follow the baby steps below to get started:
Whether you’re a student, an employee, a blue card holder or a permanent resident, you can trade in the German market without much hassle. The only requirement is that you use your own money to trade stocks.
Before trading, you must set up an emergency fund that covers at least three to six months of your expenses.
Next, you will need a securities account. There are two ways about it:
When you set up your securities account, you’ll need a valid identity document like a passport or a German identity card. In addition, you need an email address and a valid address in Germany. Visit Postident online or a physical post office to verify your identity.
You’re all set! It is up to your personal choice regarding actual investment, but playing it safe at least the first time around is recommended. As the profits pour in, you can also send money online from Germany to Pakistan. A key takeaway from this blog is that you should invest in an Index Fund to learn the ropes first and then explore the horizon as you go.
The German stock market offers both domestic and international markets to invest, which is great for expats living in Germany. The stock market has a “Dual Listing” system where investors have better access to companies since their stocks can be listed on multiple exchanges. Pakistani expats in Germany can earn through the stock market and make a money transfer from Germany to Pakistan. Once you can get into trading, learning about its intricacies side by side won’t intimidate you as much. Happy Trading!
You can transfer funds to a Pakistani bank account to invest in the stock market. This allows you to participate in investment opportunities back home while living abroad.
Online money transfer services usually offer lower fees, making it cost-effective to send money for investments. This ensures that more money goes towards growing your investments rather than paying high fees.
Use a trusted money transfer service that offers secure transactions and tracking features. This gives you confidence that your money will reach its destination safely and be available for investment.
Online transfers are the fastest way to send money, ensuring you can capitalize on investment opportunities. You can act on time-sensitive opportunities in the stock market by choosing a service with quick processing times.
Be aware of any regulatory requirements in Germany and Pakistan, though most personal remittances for investment are straightforward. It’s wise to stay informed about any changes in these regulations to avoid any compliance issues.
