Every day an expert from the t-online advice editorial team answers a reader’s question about money. Today: What do stocks bring after taxes and costs?
Five percent return on stock funds per year? Sounds good at first. But the actual return is often lower because you first have to deduct costs and taxes from the profit. Given this background, a reader asked us whether the effort of trading stocks is actually worth it. Let’s take a closer look at fees and taxes.
To invest in stocks, you need a deposit with a bank or broker. This can be set up quickly these days and the portfolio management is usually free of charge. Instead, banks and brokers earn money from their customers’ trading activities. An order (i.e. a purchase or sale) often costs between one and ten euros, depending on the broker.
Costs can be fixed, i.e. around 1 euro per order. A few brokers even waive fees entirely if you invest a minimum amount and agree to a specified exchange. On the other hand, banks often charge a minimum fee (for example 4.95 euros) and a percentage of the invested amount as fees. With brokers you can usually travel much cheaper.
If you are not interested in individual stocks but in stock funds, it depends on where you buy them. Actively managed funds are often offered through an investment advisor or your bank: you pay ongoing fees for fund management and often additional acquisition fees. These can add up to several percent. Of the five percent increase in value, you may only have one or two percent left.
It is significantly cheaper if you also buy stock funds on the stock exchange through your broker. Stock ETFs that track a stock index are popular. These are available from 0.2 percent management fees; they cost a fraction of what you pay with active funds. There are no acquisition fees for the fund company. Accordingly, more of the fund’s actual performance remains with you.
If you sell shares or funds at a profit or receive dividends, withholding tax is due: That’s 25 percent. There is also the solidarity surcharge and, if applicable, church tax. The tax deduction is automatically made by your bank – unless you have submitted an exemption request to your bank.
This can often be done simply with a click. Because you can collect up to 1,000 euros per year in capital gains tax-free. If you are married, it is even 2,000 euros. If you have forgotten to submit the exemption request, you can also repeat the tax paid using the KAP appendix of your tax return.
After costs and taxes, some of the securities profit may be lost. If you do it cleverly, you will still have a worthwhile return. You can buy stocks or ETFs at low order fees through brokers such as Trade Republic, Scalable Capital or Just Trade. Compared to actively managed stock funds, the management costs for ETFs are minimal and there are no acquisition fees for the fund company. You don’t pay any taxes on winnings of up to 1,000 euros per year.
