Stocks offer an excellent way to build wealth step by step. Here you'll learn why trading stocks pays off, what to keep in mind, and how to invest in stocks step by step.

Why you should invest in stocks

Many people still consider stocks a risky investment strategy, especially in Germany, but that's unjustified: over the long term, stocks deliver good returns in many cases.

If you want to build wealth for the future, you can't get around stocks, given the very low interest rates on savings, money market and CD accounts. The compound interest effect is a decisive factor in building wealth. It usually takes hold at a return of at least 5 percent, a figure that is quite realistic for stocks, unlike other forms of investment.

Stock market performance is uncertain, but there is a clear indication that stocks generally rise over the long term: economic growth, which has developed positively over the past decades. This increases corporate profits, which in turn leads to rising stock prices.

What do I need to keep in mind when buying stocks?

If you want to invest in stocks, one of the most important rules is: diversify broadly. So don't buy one or two stocks, but reduce your risk of loss by choosing shares of several companies, preferably from different industries or countries. That way, your portfolio isn't automatically in the red if one or two of the companies hit a rough patch.

Tip: Mutual funds and ETFs are a good alternative to individual stocks. They automatically invest you in a large number of companies, which reduces your risk.

It's also important that you only invest money in stocks that you can afford to set aside. You should never take out a loan for it. Also make sure you can do without the invested money for a period of at least 10 to 15 years.

How do I invest in stocks?
To invest in stocks, the following steps are necessary:

  • Open a brokerage account
  • Put together your securities portfolio
  • Choose a trading venue

You open the brokerage account for buying and selling your stocks with a traditional bank or an online bank. The advantage of the first option is that you usually have a contact person on site. On the other hand, account maintenance and order fees are usually lower at online banks.

Once you've opened your account, you put together your securities portfolio. In other words, pick the stocks you want.

Tip: Beforehand, research the company whose stocks you want to buy thoroughly, and look at the stock's past performance.

Finally, you decide which trading venue you want to use to invest in stocks. You can choose between different exchanges as well as over-the-counter direct trading, where you save on exchange fees and broker commissions.