Statistics refutes three myths: Germans are not boring savers

Sunday, February 28, 2021

Statistics refutes three myths
Germans are not boring savers

From Stefan Schaaf

Isn't there more to the Germans than a savings account? That was once! The statistics from the BVI fund association show that people have received further financial training. In 2020, equity funds will collect five times as much money from private investors as in the previous year. Three trends can be identified.

The Germans are still regarded as financially uneducated "savings book" savers. But with this assessment it is like with many myths: They once had a true core, but the world has turned on, only the myth somehow persists. This also applies to investments in this country. In addition to the "savings book", people in Germany are relying more and more on investing in the capital market. And they do that by buying more shares, using cheap ETFs and tackling the whole thing more sustainably. In any case, these three trends can be read from the current statistics of the BVI fund association, which were presented on Tuesday.

Myth 1: Germans are savers in savings accounts

One remark in advance: Even if the "savings book", today usually a call money account, does not yield any interest and money actually loses purchasing power due to inflation, the basis of every financial investment should be the bank balance. It is available daily and nominally retains its value. For emergency situations or larger purchases it is exactly the right thing and should include a larger chunk of money than the often cited three net monthly salaries. This rule goes back to times when bank balances could be held as term accounts and with high interest rates.

How is it now with investors in Germany? So are the savers who put their euros on the high edge into investors who want to take some returns with them? Apparently yes, because even in the crisis year 2020, open-ended mutual funds in Germany experienced significant inflows overall. The so-called net inflow of funds amounted to 43 billion euros last year after only 17 billion euros in 2019. At the end of the year, 1.18 trillion euros were invested in open-ended mutual funds, typically equity, bond and mixed funds. Ten years earlier it was only 710 billion euros. Apparently there are not only savings accounts but also fund savers. After all, around ten million people in this country are now regularly investing with savings plans, according to BVI estimates.

The composition of the tributaries is remarkable, which leads to Myth 2.

Myth 2: Germans don't buy stocks

Well, these young people who gamble around with trading apps, that's not a stock culture. Another myth, just like the one: Germans don't invest in stocks. "Fund sales are led by equity funds," says BVI President Alexander Schindler, a full-time member of the Management Board at Union Investment. This is shown by the statistics on the net inflow of funds. The pure equity funds, which are aimed at private investors, collected a net amount of 20.9 billion euros in fresh money in Germany in 2020. In the previous year it was only 4.5 billion euros. After a strong outflow in the first quarter, investors came back quickly, and in all three subsequent quarters, the equity funds again flowed in net cash. In mixed funds, on the other hand, the big growth driver in the fund business for a long time, the inflow stagnated at a good 10 billion euros. Business with open-ended real estate funds also grew at a slower pace, with the net inflow of funds falling to 8.3 from 10.6 billion euros.

But the Germans would not be the Germans if they weren't increasingly price-conscious about investing in equities: of the 43 billion euros in net inflows, around a third went to passive funds. In the case of stocks, these cheap ETFs already draw half of the funds raised. In the case of bond funds, also known as pension funds, the bottom line was that there were even outflows from expensive active funds and inflows into cheap passive funds.

Myth 3: Nobody wants to invest sustainably

German private investors have long since given a clear vote when it comes to sustainability: They want their money to be invested according to ecological and social criteria as well as the rules of good corporate governance – at least a very large number of them. According to the BVI, around half of the net income is now attributable to sustainable investments. The year 2021 will now show whether the ceiling has been reached with a share of 48 percent, as in 2020 and 2019, or whether the trend towards an increasing share from previous years will continue. In 2017, only 6 percent and then in 2018 16 percent of the new money was invested according to ESG criteria. The topic could get a boost in the second half of the year, when investment advisors are obliged to ask whether there is a preference for ESG when investing.

The trends towards cheap ETFs and sustainable products are likely to continue. They sat out the stock crash around a year ago. "The private investors were surprisingly calm, the government measures took away their fear," said Schindler, looking back. It remains to be seen whether this will be the case next time.

The article first appeared on Capital.de.