Advertisement

Germany’s equity culture recovers

Many Germans burnt their fingers badly in the stockmarket in the late 1990s, and have continued to be wary of equities. But now, lousy returns on savings accounts have clearly started to irritate people and promote risk-taking.

Only 9% of German wealth is invested in shares and investment funds, according to the Bundesbank. "Germans like fixed interest rates, and are willing to sacrifice higher returns for that security," Kay Bommer, general manager at the German Investor Relations Verband, told Reuters.

Apart from being famously risk averse, many Germans burnt their fingers badly in the late 1990s. Close to two million people bought into the "heavily advertised but ultimately ill-fated flotation of state-owned Deutsche Telekom in 1996," Tobias Buck points out in the Financial Times. When the dotcom bubble burst, they suffered heavy losses. "This did a lot of damage to the reputation of the stockmarket," Martin Weber, a professor of economics at the University of Mannheim told the FT.

Advertisement - Article continues below

But now the lousy returns on savings accounts with interest rates at record lows have clearly started to irritate people and promote risk-taking. The number of shareholders in Germany rose to 10.3 million last year, a 12-year high, from a post-crisis low of 8.4 million.That's still very small compared to the US or Britain, but it's an encouraging development. The trouble is that history may be repeating itself. As in the 1990s, Germans may be once again turning to the stockmarket at the last stage of a prolonged bull run . So the "next crash could turn yet another generation off shares," says Buck.

Advertisement
Advertisement

Recommended

The British equity market is shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
7 Aug 2020
BP has slashed its dividend – and markets love it
Income investing

BP has slashed its dividend – and markets love it

BP has bowed to the inevitable and cut its dividend in half – and its share price promptly rose. John Stepek explains what it means for shareholders …
4 Aug 2020
Listed companies are dying out, and that could have serious consequences
Stockmarkets

Listed companies are dying out, and that could have serious consequences

Private equity is taking over from public stockmarkets as the biggest provider of capital to companies. That’s bad for investors and bad for society a…
3 Aug 2020

Most Popular

Gold hits the big $2,000 level – are Aim miners about to play catch up?
Gold

Gold hits the big $2,000 level – are Aim miners about to play catch up?

With the price of gold shooting through $2,000 an ounce, the yellow metal looks unstoppable. Things are so bullish, even Aim-listed junior gold miners…
5 Aug 2020
Don’t despair on dividends – these companies could be set to bring them back
Income investing

Don’t despair on dividends – these companies could be set to bring them back

The value of dividends paid out by UK stocks has plummeted this year as companies “rebase” their payment policies. But things could soon start to look…
6 Aug 2020
Too embarrassed to ask: what is “real return”?
Too embarrassed to ask

Too embarrassed to ask: what is “real return”?

MoneyWeek's latest "too embarrassed to ask” video explains what a real return is and why it's so important for investors.
5 Aug 2020