Share investments in demand: Private investors are buying more index funds

Status: 02/01/2022 2:41 p.m

The trend towards passive index funds as an investment and old-age provision is continuing. Private investors invested 2021 billion euros in the products. They preferred equity index funds.

More and more Germans are discovering the stock market as a form of investment. This is shown by the inflows into index funds, so-called ETFs, which are based on certain stock market indices. The funds collected billions again last year.

According to a current study by the direct bank ING and the consulting firm Barkow, which is based on data from the Bundesbank and the BVI fund association, among others, demand for fund products continued to increase in the past year. Private investors in Germany held almost 150 billion euros in ETFs at the end of the year. This corresponds to an increase of 50 billion euros compared to the previous year. Investors invested 27 billion euros in new index funds. The rest of the growth in the funds was contributed by rising prices in the stock market year 2021. The German stock exchange index DAX, for example, recorded an increase of almost 16 percent last year.

Investment behavior changes

According to the authors of the study, Germans are increasingly changing their investment behavior. On the one hand, more and more funds are flowing into inexpensive ETFs instead of into conventional funds. Unlike these, where a professional manager makes the decision about buying and selling shares and the weighting of individual stocks, ETFs simply replicate an index like the DAX. Index funds therefore have significantly lower fees than actively managed funds. In doing so, they have been competing with established products from banks and savings banks for years.

ETFs have been on the rise among large investors for a long time. According to the study, the total volume invested in index funds across Europe has more than quadrupled to around 1.4 trillion euros since 2014.

Stock investments are very popular

There is also a clear shift in weight within the ETF universe. Private investors are increasingly opting for equity ETFs, i.e. index funds that track a stock market index such as the DAX, the European EuroStoxx 50 selection index or the MSCU World index for industrialized countries. The proportion of equity index funds held by private and professional investors in Germany is 93 percent. Other ETFs are, for example, bond or commodity products.

Last but not least, the development away from the traditional branch bank towards the discount broker continues – especially among ETF investors. A good half of the funds invested in index funds are managed by direct banks such as ING, DKB or Consorsbank. The start-up banks that have been available for a few years, such as Scalable Capital, Smartbroker or Zero, are likely to have further increased the demand for ETFs. Many of the institutes now also offer savings plans on ETFs, which are well received by customers. In many cases, the fund products can be saved without purchase fees.

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