Individual stocks vs. ETFs

The most important investment decision for beginners: pick individual shares or invest broadly diversified via an ETF?

Individual shares:

✅ Chance of above-average returns (Amazon: +200,000% since its IPO)
✅ Voting rights at annual general meetings
✅ Exciting and educational
❌ Total loss possible (Wirecard: −99% in one day)
❌ A lot of time needed for research
❌ Over 90% of private investors don't beat the index in the long run

ETF (e.g. MSCI World):

✅ Broad diversification: 1 ETF = 1,500+ shares from 23 countries
✅ Cheap: 0.10–0.22% TER per year (instead of ~1.5% for active funds)
✅ Segregated assets: your money is protected even if the broker goes bust
✅ No time required ("buy and hold")
❌ No outperformance possible (you get exactly the market)
❌ Slow, steady returns (less exciting)

The numbers speak for themselves:

• SPIVA study (15 years): over 90% of active fund managers lose against their index
• MSCI World (15 years): not a single loss-making period since 1970
• Individual shares: approx. 55% of all shares return less than government bonds in the long run

Tax in Germany:

• Both: 26.375% flat-rate withholding tax
• ETF advantage: 30% partial exemption on equity ETFs → effective tax rate only ~18.5%
• Individual shares: no partial exemption

Recommendation:

• 80–100% ETFs as the core of your portfolio
• 0–20% individual shares as "play money" for learning (only with money you can afford to lose)