Investing Abroad in Germany
As an expat looking to diversify their portfolio abroad, consider investing in Germany as a viable option. Germany is Europe’s largest economy and the fourth-largest in the world. There are a few main ways for foreigners to really tap into the German investment landscape, and some even come with residency perks.
Residency Through Entrepreneurism
If you are a foreigner looking to start a business in Germany, there are few important facts to know. First, in doing so, you are able to use this business formation as a governmentally accepted qualification for applying for German residency. This “Entrepreneur Visa,” as it is casually known, was formed in 2012 by the German government to stimulate beneficial investment into the country by foreign nationals. While there is no set requirement for investment value, as it is dependent on the business, the general suggested amount is €250,000.
In order to qualify for this residency through investment, you will have to present a strong business plan with clear plans to stimulate economic growth in the country. You will have to show you have the funds or credit approval to securely finance the business endeavor, and you will have to show a record of past entrepreneurial success. Finally, it’s important to show a certain level of innovation in your proposed business, introducing a unique product or service to the international markets.
When you apply, you will have to show proof of pension if you’re over 45. This must guarantee a monthly income of around €1,110 after the age of 67. Citizens from the Dominican Republic, Indonesia, Iran, Japan, Philippines, Sri Lanka, Turkey, and the United States of America do not need to provide proof of pension. If you can invest into Germany the suggested minimum of €250,000, you can fast-track the process and skip many of the requirements of application.
If you decide to go this route of residency when investing in Germany, the perks are very beneficial. The residence permit through investment lasts for three years, renewable for the duration of the profitability of the business. After three years, however, investors can apply for permanent residency, with citizenship being attainable after 5 more years. In addition, you will receive a family visa for your spouse and dependents, allowing them to live abroad and work in Germany.
ETFs
If residency isn’t your endgame, and you’d like to invest in the German stock markets, ETFs (exchange-traded funds) might be your best option. These securities can be purchased directly on the U.S. stock exchanges, providing a diversified and international investment landscape right from the comfort of your own home.
iShares MSCI Germany Index Fund (EWG) is the most popular ETF for foreign investors, with a net asset value of over $3.1 billion. Germany Bond Index Fund (BUND), ProShares Germany Sovereign/SubSovereign (GGOV), and Market Vectors Germany Small Cap ETF are also popular among those looking to invest abroad in Germany.
Why Invest in Germany?
As the EU’s largest economy, and fourth largest globally, Germany is second in the world in exports. The country’s membership in the European Union has also helped Germany to prosper, providing business-friendly regulations and sparking positive economic competition among states, making it an ideal place to invest in abroad. Germany also has one of the best-educated and motivated workforces in the world.
Drawbacks of Investing in Germany
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While investing abroad in Germany can be very fortuitous, there are some potential drawbacks to keep in mind. First, the population of Germany is aging, placing an increased burden on social welfare programs. Second, since EU countries are linked via sovereign debt, one country’s failures could hurt Germany collaterally. Finally, these sovereign debt problems have forced Germany to participate in bailouts in the past, with very steep price tags.
Economic Data for Investors in Germany:
- Associated Trade Organizations: WTO, OECD, and EU
- Exchange Rate: €1 = $1.18 USD
- GDP: $3.46 trillion (nominal, 2016), $3.98 trillion (PPP, or Purchasing Power Parity, 2016)
- GDP Rank: 4 (nominal), 5 (PPP)
- Population Below Poverty Line: 16.7%
- Inflation: 1.7% (2017)
- Average Gross Salary: €44,400 ($52,200)
- Average Net Salary: €27,100 ($31,800)
- Ease of Doing Business: 17th in the world.
- Main Industries: iron and steel, coal, cement, mineral fuels, chemicals, plastics, machinery, vehicles, trains, shipbuilding, space and aircraft, machine tools, electronics, IT, optical and medical apparatus, pharmaceuticals, food and beverage, textiles.
Author Bio:
Tyler Sorce is an American writer and digital nomad currently living in Lisbon, Portugal. In a past life he was a chef in Manhattan and Paris, follow his travels and favorite dishes on Instagram.
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