“My colleague has an ETF – what is that?” Here are the terms, sorted and translated. I recommend no product and no index – I am not licensed to, and I do not want to.
The building blocks
- Share (Aktie): a slice of a company; possible dividend, full business risk.
- Bond (Anleihe): a loan to a state or company; interest plus repayment – if the debtor can pay (issuer risk).
- Fund (Fonds): a pooled pot buying many securities; you own units of the pot.
- Index: a list representing a market – a calculation, not a product.
- ETF: a fund that replicates an index and trades on the exchange.
Active vs. passive, distributing vs. accumulating
| Term | Meaning |
|---|---|
| Active | A manager picks holdings to beat the market; costs more. |
| Passive | The fund mirrors the index 1:1; costs less. |
| TER | Total expense ratio per year, deducted inside the fund. |
| Distributing | Income is paid out to you. |
| Accumulating | Income is reinvested in the fund. |
Sondervermögen vs. certificate
A fund or ETF is Sondervermögen (segregated assets, § 92 KAGB): investor money is held apart from the fund company and custodian, so their insolvency does not touch your units. A certificate, ETC or ETN is a debt security – an issuer’s promise that dies with the issuer.
Monetary vs. tangible, and three ground rules
Monetary assets (savings, bonds, classic life insurance) promise a fixed euro sum and lose purchasing power under inflation (see Inflation, interest and purchasing power); tangible assets (shares, property, gold) have intrinsic value and fluctuating prices. Ground rules: risk and return go together; diversification limits single failures; time horizon – money needed soon tolerates little fluctuation.
Taxes on capital income in Germany
- Flat-rate tax: 25 % plus 5.5 % solidarity surcharge = 26.375 % (§ 32d EStG).
- Saver’s allowance: €1,000 per person, €2,000 for jointly assessed spouses (§ 20 (9) EStG), via an exemption order.
- Partial exemption: 30 % of equity fund income is tax-free, 15 % mixed funds, 60/80 % property funds (§ 20 InvStG).
- Advance lump sum (Vorabpauschale): accumulating funds are taxed yearly on a notional return: value × base rate × 70 % (§ 18 InvStG). Base rate 2026: 3.20 % (Ministry of Finance letter, 13 Jan 2026). Example: €10,000 → €224 → after 30 % exemption €157 → tax about €41, due January 2027, only if the fund actually gained that much and only above your allowance.
Key information document
Funds, ETFs and certificates need a Basisinformationsblatt under the PRIIP Regulation (EU) 1286/2014 with a risk indicator from 1 (low) to 7 (high), costs, holding period and scenarios.
A glossary, not advice. Whether and what suits you is something to clarify with an adviser licensed for that purpose.
How to proceed
- For every offer ask: Sondervermögen or debt security? Active or passive? Which TER?
- Read the key information document.
- Set up an exemption order for your saver’s allowance.
- Define your time horizon honestly.
- Ask a licensed adviser whether and what fits.
General information, not legal, tax or investment advice. Sources: German Income Tax Act (§§ 20, 32d EStG), Solidarity Surcharge Act, Investment Tax Act (§§ 18, 20 InvStG), Ministry of Finance letter of 13 Jan 2026, Capital Investment Code (§ 92 KAGB), Regulation (EU) 1286/2014, BaFin, consumer advice centres – as of October 2026. Missing a term? Get in touch.
