Where to Buy Stocks: A Comparison of Stock Depot Providers

Opening a Securities Account to Buy Stocks

To buy stocks (or ETFs and the like), you need a securities account.

You can also open multiple securities accounts with different providers and hold different (or the same, but not the exact same) securities there.

You can also transfer securities from one account to another. However, this is often avoided, as such a transfer can sometimes take many weeks and can be somewhat nerve-wracking.

Moreover, your purchase prices (the exact price at which you bought each stock) may not be transferred, so you may have more work with tax declarations.

This should not happen when switching between two German depot providers. However, when switching between an international broker like Interactive Brokers and a German provider, it is common for additional work for your tax return to arise due to a lack of automation.

This extra work is manageable but reduces the attractiveness of the fundamentally recommended broker IKBR (Interactive Brokers), which is thus more suitable for larger investment amounts.

When switching from/to an international broker, it is not uncommon for investors to sell all their stocks in the old depot and immediately buy them in the new depot to avoid such issues. However, this triggers a taxable event, as you may likely make a profit.

Process of Opening a Depot

1. You open a securities account online with a depot provider. This can be done within hours with some providers, e.g., with verification via photo of ID or residence permit and possibly a live video on the smartphone.
2. You receive a new personal IBAN for this securities account. You are the account holder; the account is thus in your name. You may need to look up this new IBAN in the online access of your securities account, e.g., by clicking on “Transfer” or something similar.
3. You transfer money from your checking account to this new IBAN number, e.g., from Max Mustermann, IBAN 123456789, Sparkasse Munich, to Max Mustermann, IBAN 987654321, ING Bank (securities account).
4. The money arrives on the new IBAN, as with other transfers, on the same or the next day. Not all depot providers offer real-time transfers on the recipient’s side.
5. Once the money is received, the depot provider notifies you, or you simply check yourself.
6. The trend in managing depots is moving toward smartphones with most providers. Even if you prefer to manage your depot on a desktop computer, you will likely still need your smartphone, while you don’t need a desktop computer if you do everything on your smartphone.
7. After the money has arrived in the depot, you can usually start buying stocks or other securities, such as ETFs, right away. You can search for specific securities by company name or ticker symbol.
8. You may notice that some more exotic stocks are unavailable from your depot provider. You should clarify this beforehand (by emailing the provider or researching online) if you want a particular security.
9. When you find your desired stock, the current price is displayed, and you can click on “Buy” or similar.
10. Warning – SPREAD: Now, before the purchase is completed, the final price including fees should be displayed. While you probably already knew the fees (approx. 1 – 10 EUR per purchase with recommended providers), you will notice that the stock price is suddenly shown as higher than it was just a moment ago when you clicked on it. This is the so-called spread, a difference between the displayed and actual purchase price. This spread fluctuates throughout the day and is lowest when there is heavy trading. Ideally, you buy in the afternoon, between 3:30 PM and 5:30 PM, when both the U.S. and German exchanges are open. In the evening, the displayed prices are sometimes lower, but the spread can be significantly higher.
11. After you click “buy” again, the stock is purchased for you and is transferred to your depot. This should take no longer than a second.
12. The stock is not bought in your name. Microsoft, therefore, never learns that you, Max Mustermann, are now a shareholder. The stock can theoretically be bought in your name for added security at some depot providers, but it is expensive and generally not used by regular people.
13. The broker operates a sort of collective storage. The broker itself, of course, knows which stocks belong to you, but not the company from which you buy stocks.
14. The issue of “not in one’s own name” occasionally arises in connection with the protection against the loss of stocks. Stocks are theoretically protected as separate assets even in the event of the depot provider’s bankruptcy. The insolvency administrator or creditors are not allowed to access them. There are central clearinghouses and established procedures in the event of a depot provider’s insolvency. A loss of stocks would only be conceivable in the case of criminal behavior by the depot provider. The worst that can happen is likely that the stocks cannot be accessed for many months in extreme cases until everything is clarified.

Depot with a “Neobroker” or Traditional Bank

Neobrokers are depot providers, often without a full banking license, that offer a limited portfolio of financial services tailored to a younger clientele. The usage is usually optimized for smartphones. The account opening is often done entirely online and within a few hours.

As newcomers who do not enjoy the trust of established banks, Neobrokers generally try to attract customers with modern features and low fees.

The staff at Neobrokers is often thin, so there may be delays in support inquiries. According to online reports, the transfer of a securities account to or from a Neobroker is also occasionally delayed.

However, we did not find any reports of stocks being lost during the depot transfer.

Lower Fees with Neobrokers

Fees for stock purchases are regularly lower with Neobrokers than with established full-service banks.

This primarily affects the purchase of a few individual stocks, while the difference is much less significant when buying a larger stock package (example: 50 x Microsoft for approx. 19,000 EUR).

Each purchase incurs an order fee, which is either fixed or capped at least at the top. If you want to buy 3 Microsoft, 2 Google, and 5 ASML, the order fee is charged three times. To our knowledge, it is not possible to combine this into a single order.

Neobrokers are better suited for buying individual stocks separately (e.g., 1 x Microsoft for 380 EUR), especially if the stock is inexpensive since the order fees at traditional banks would account for too much of the total price and eat up your return: Example: 1 Nvidia for 100 EUR and fees of 7.50 EUR.

A possible strategy to build a portfolio with small individual purchases would be to do this with a Neobroker and eventually transfer the depot to an established provider once no further small purchases are planned.

For the long-term custody of stocks without much trading activity, we would rather choose a large full-service bank like ING than a Neobroker.

With a larger bank, we believe that insolvencies, company sales, problems with banking supervision, and similar events are less likely in the long term, thus minimizing potential time and stress for the depot holder.

Comparison of Popular Brokerage Providers

In online comparisons of brokerage providers, the conditions for ETF savings plans often take center stage. However, here the focus is on the direct purchase of individual stocks.

Therefore, we do not consider savings plan conditions here. These are similarly affordable at most providers and generally have less impact than when buying stocks.

For smartphone-oriented users who plan to place many small orders, that is, predominantly buy individual stocks or just a few at a time, we recommend neobrokers like Trade Republic and Scalable Capital due to their low fees.

Larger full-service banks are suitable for investors planning primarily larger orders or those who place special value on prompt, personalized support.

Brokerage Accounts with Neobrokers

Neobrokers offer lower costs, but the companies are not as established, support may be weaker due to limited staff, and long-term stability might not be as secure as with ING, Comdirect, Consors, DKB.

Our favorite neobrokers are Trade Republic and Scalable Capital. Finanzen.net Zero feels somewhat like an extension of a website, and the “0 EUR” order fee doesn’t necessarily leave a positive impression. Flatex is especially popular in Austria, where the range of neobrokers isn’t as extensive as in Germany.

Flatex, Smartbroker, and Traders Place offer more types of securities than Trade Republic (no equity funds), Scalable Capital (no bonds), and Finanzen.net Zero (no bonds), as well as additional international markets (USA, Europe) instead of just Germany.

These theoretical advantages are not especially relevant for beginners who mainly want to buy stocks of large American and European companies. We only list the three most popular neobrokers. The others do not stand out in terms of online reviews and ratings compared to the better-known brokers.

We generally recommend neobrokers for starting out, for smaller investment amounts, and for smartphone-oriented individuals. However, this does not mean that one should also select the lesser-known providers within the “neobroker” niche.

* The 3.75% (as of Sep 2024) interest on Trade Republic’s clearing account balance is very attractive on one hand but less relevant if you use funds in the TR account promptly for stock purchases.

Deposit 10,000 EUR and let it sit for 5 days before buying stocks, and you will earn an additional approx. 5 EUR.

This is a small advantage of Trade Republic over Scalable Capital, where, at least in the “FreeBroker” version discussed here, there is no interest on funds. The gap with Scalable grows if you use the TR clearing account as a well-interest-bearing savings account and keep money there instead of buying stocks.

However, the TR savings account, as of Sep 2024, is not necessarily protected by German deposit insurance but potentially by Irish, French, or similar insurance, as TR collaborates with banks from these countries. Although TR has had a full banking license since the end of 2023, this setup will initially remain. In principle, this should make no difference, but in extreme cases, German deposit insurance is still considered more reliable than French or Irish.

To check if your TR clearing account funds are with a German bank, you can go to your profile in the TR app and see the BIC of the bank where the money is held.

P.S.: Our “test account” with TR, as of Sep 2024, has the TRB… BIC. This means that the clearing account is with the new “Trade Republic Bank.” It is possible that TR will transfer all (?) clearing accounts to its new bank over time instead of distributing them among various non-German partner banks.

Accounts with Full-Service Banks

Among full-service banks, ING is considered a good choice. The fees are higher than with the neobrokers mentioned above but lower than with other full-service banks.

In addition, there is a range of securities available, which is more comprehensive than with Trade Republic or Scalable Capital, as well as other services of a full-service bank. Besides ING, Consors, Comdirect, DKB, and 1822direkt (a subsidiary of Frankfurter Sparkasse) are also interesting.

The cost per order for the full-service banks mentioned above, except for DKB, is around 10-60 EUR depending on the order volume, with an upper limit of around 60 EUR (except at Comdirect, where there is apparently no limit for the “exchange-based” additional fee of 1/200 or 1/400 of the order amount). DKB has fixed rates of 10, 20, and 30 EUR (30 EUR for orders above 20,000 EUR).

DKB is Ideal for French and Canadian Stocks

Withholding tax reduction and refund are associated with additional effort for French and Canadian stocks. Several forms must be filled out, certified by the German tax office, and then sent to the broker, who then forwards them to the French authorities.

This process needs to be done every three years, and DKB supports it commendably for a low double-digit fee. For the highly interesting French luxury stocks like Hermès, LVMH, Christian Dior, and others, DKB is therefore recommended, perhaps as a second brokerage account.

More on the topic of withholding tax in this video by Investflow.

Conclusion: Trade Republic and/or ING

Update 07.10.2024: In the Trade Republic account of one of our employees, incorrect price growth has been displayed for a position for weeks, as a stock split was apparently not recorded, and the price growth is grayed out for another position. This only affects the “price increase since purchase” display, and the portfolio value seems correct, but it is still somewhat unsettling as it appears it will not be resolved without further intervention. Update 09.10.2024: Only two days after our above report, the display for both stocks in the affected account was corrected. Glad we didn’t have to take action, although it took TR about two weeks to correct it autonomously.

For beginners or generally smaller orders, we recommend Trade Republic. The low order fee of 1 EUR makes it economically viable to buy individual stocks, even those with a low price. This allows building a small portfolio of dozens of individual stocks, even with relatively little money.

A practical strategy can be to build a portfolio with Trade Republic and then, when larger stock purchases are possible or at least no small purchases are planned, transfer the account to ING as a long-term savings vehicle.

If you want to buy larger stock packages from the start or only want to hold your portfolio for the long term, we recommend ING.

If you are already a satisfied customer of Consors, Comdirect, 1822, or DKB and are planning to buy larger stock packages instead of individual stocks or small stock packages, it may make sense to also open a brokerage account there.

If you are a satisfied savings bank customer and also want your brokerage account there, we recommend S-Broker instead of an account directly with Stadtsparkasse XY. The conditions at S-Broker are reasonable and comparable to those of the full-service banks mentioned.