Are you currently looking after your finances and want to generate attractive returns? You have probably already noticed that interest rates on traditional investments such as savings accounts are no longer worthwhile. In the course of your research, you may have come across ETFs. But are they suitable for beginners? This article provides an overview of ETFs for beginners to help you get started with investing!

In brief:

You should be aware of these risks before investing in ETFs.
We show you how this asset class works and the reasons for investing in exchange-traded funds.
Are you wondering how to find an ETF for beginners? In this article, you will learn about the most important aspects to consider when making your selection.

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Contents Hide

1 What are ETFs?

2 ETF investing for beginners? Here’s how to get started!

3 Conclusion: Buying ETFs for beginners – how you can benefit from attractive return opportunities

What are ETFs?

Before we look at how you can invest in ETFs, let’s take a closer look at this asset class so that you can understand it better. This includes how it works, the potential opportunities and risks you can expect if you decide to invest.

How does an ETF work?

The term ETF stands for ‘Exchange Traded Fund’. As you can see from the name, this is a type of fund. You can think of a fund as a kind of investment pot into which a large number of investors pay money. This money is then used to invest in a specific financial instrument.

A basic distinction is made between two types of funds:

Active fund: This type of fund is managed by a fund manager. The fund manager puts together the fund from different positions and is responsible for how heavily each position is weighted. Their goal is to achieve excess returns, i.e. to beat the average market return. In reality, it is very rare for a fund manager to achieve this over long periods of time. In addition, active funds are associated with higher costs, as the fund manager’s work has to be paid for.
Passive funds: ETFs belong to this type of fund. No fund manager is required here, as funds are based on an index and attempt to replicate it as closely as possible. Their aim is to achieve the average return of the respective market. The fees are significantly lower here, as no fund manager is required and the composition is already fixed.

But what exactly does an ETF invest in? There are many different types of ETFs. With this type of security, you can invest in stocks, commodities or bonds. In this article, we focus on ETFs that invest in stocks. They combine the attractive return potential of stocks with the increased security of ETFs.

As already mentioned, ETFs are based on an index in terms of their composition. One example of this is the DAX. If an investor decides to invest in a DAX ETF, they are investing their money in the 40 largest German companies – with just a single security! But why is this considered one of the biggest advantages of ETFs?

Why should I invest in ETFs?

Let’s stick with the example of the ETF that tracks the DAX. Imagine that an investor invests in just one stock. The investment performs well for a few months, but suddenly the company runs into serious financial difficulties and is forced to file for bankruptcy shortly afterwards. With an investment in just one security, losses can quickly mount up or even result in a total loss.

Another investor, on the other hand, has put his money into a DAX ETF. This invests in the 40 largest companies in Germany. If one of these companies unexpectedly enters a difficult economic phase, this is not a problem for this investor. The positive performance of the other companies can, so to speak, ‘absorb’ the losses.

This is diversification or risk spreading, one of the biggest advantages of this type of investment. Invest in different companies, industries and countries to spread the risk across many individual assets and make your investment more secure.

Another advantage is that you hardly need any time or effort to invest in ETFs:

You need to get to grips with the basics and build up your portfolio by choosing one or two ETFs.
In contrast, investing in stocks is very costly and time-consuming: you have to deal with analysis techniques, the company itself and current news.

Inflation refers to a general increase in the price level. Money that is not invested to generate a return can lose value over time due to inflation. This means that although you have the same amount of money, it is worth less and less. You can buy fewer goods for the same amount of money.

Investments that used to be very popular, such as savings accounts or building society savings plans, now only yield low interest rates. These are not enough to offset inflation. Stocks are among the highest-yielding investments. You can benefit from attractive return opportunities and protect your assets from inflation.

As already mentioned, ETFs are passive funds. Compared to other asset classes, the costs here are significantly lower. For example, ongoing costs are incurred in the form of a TER. This is usually between 0.1 and 0.5 per cent per annum. This makes it an inexpensive asset class.

ETFs are also a relatively safe investment. If investors ensure sufficient diversification, they can increase the security of their portfolio. ETFs are legally considered special assets. This means that banks must keep the invested money separate from their own assets. In the event of your broker or bank becoming insolvent, your money is therefore protected.

What risks should I expect?

Investing for beginners also involves conducting detailed research into potential risks. Not all ETFs are sufficiently diversified. So-called theme ETFs do not attempt to cover the broad market, but instead specialise in specific areas. This means that investments are only made in a specific sector, which entails risks.

These types of ETFs are not suitable for beginners. Advanced investors invest in thematic ETFs when they see potential in certain sectors, want to further diversify their portfolio and thereby increase their returns.

In addition, ETFs are traded on the stock exchange. As with other asset classes traded on the stock exchange, investors must expect price fluctuations. These can change constantly. In addition, there may be sharp declines in economically difficult times. Investors would incur significant losses when selling, which is why you should only invest money that you do not currently need.

There are two different types of replication that determine how an index is mapped:

Physical replication means that the values contained in the index are actually purchased.
Synthetic replication is significantly more complex, involving a kind of exchange with a counterparty.
This creates a counterparty risk if the partner is unable to meet its obligations.

In addition, currency risk may arise if you own an ETF that is traded in a different currency. Unfavourable exchange rates can have a negative impact on your returns. To counteract this risk, you should set your investment horizon as long as possible. This also applies to price fluctuations. A long investment horizon can offset such risks.

ETF investing for beginners? Here’s how to get started!

Now that we have covered the basics of ETFs, let’s take a look at how you can build your own ETF portfolio. We will then show you some specific ETFs that are suitable for beginners.

Build your own portfolio

If you want to build your own securities portfolio, you will need your own securities account. You should also take enough time to select the right ETF. There are certain aspects that should be taken into account here.

1. Select an ETF

There are several objective criteria that should be considered when searching for ETFs. The ongoing costs are indicated in the form of the TER or ‘total expense ratio’. This is the percentage that is deducted annually. These costs should be kept as low as possible and must be taken into account when selecting a security.

In addition, an ETF should be large enough. Small and relatively young securities run the risk of being closed because they are not profitable for the provider. Investors should ensure that a security has a fund volume of at least €100 million and is at least five years old.

In addition, you can use the tracking error and tracking difference. These are key figures that provide information about the quality of an ETF. The aim of an ETF is to replicate its index as closely as possible. Deviations may occur due to transaction costs, dividends or taxes.

In addition to these objective criteria, there are also subjective aspects that you should consider. These depend on your investment strategy and personal preferences. These include, for example, the ability to set up a savings plan. Have you already saved a large sum and would like to invest everything in a single investment, or would you prefer to set up an ETF savings plan and automatically invest smaller amounts at regular intervals?

Some investors also consider sustainability when making investments. There are specific guidelines, known as ESG guidelines, which emphasise criteria that are taken into account in terms of sustainability and social behaviour. Make sure these guidelines are followed if sustainability is important to you when making your selection.

An important distinction concerns the appropriation of your profits. Here, a distinction is made between distributing and accumulating ETFs:

Distributing option: With this option, the profits you make with your ETF are paid out to you at regular intervals. They are transferred directly to your account and you can do whatever you want with them.
Accumulating option: Investors who opt for an accumulating fund reinvest their profits. The accumulating option is one of the ETF tips: This option is particularly suitable for people who want to build up long-term wealth and benefit from compound interest.

2. Create a deposit account

To start investing, you need a securities account. You can set one up at a bank or brokerage firm. Your securities will then be held in this account.

You should take your time when choosing a suitable broker. The terms and conditions can vary greatly. In addition, not every bank offers all ETFs. If you already have an idea of which security you are interested in, you should check in advance whether the ETF is tradable at this bank or not.

Good to know:

The costs can also vary greatly. Your account management should be free of charge, as this is possible with many banks. Even small fees can add up over long periods of time and reduce your returns.

Registration is usually quite simple:

You must identify yourself with an ID card or passport.
A video ID is often used for this purpose.
Many providers carry out identification online.
Alternatively, you can also stop by the post office and show your ID.
Then enter some personal details, such as your name and address.

Get started with these ETFs for beginners

Want to invest in an ETF but not sure which one? A beginner’s portfolio should be as simple and clear as possible and contain only a few securities. You should also try to cover as broad a market as possible to increase diversification.

Beginners have the option of building a so-called global portfolio from just one security. This is the simplest way to build a broadly diversified portfolio. The ETFs ‘Vanguard FTSE All-World UCITS’ or ‘SPDR MSCI ACWI IMI UCITS’ are suitable for this purpose.

Both securities take into account industrialised and emerging markets with a weighting of 90:10. The Vanguard ETF invests in 2,900 companies, while the SPDR MSCI ACWI invests in 9,300 companies worldwide, including small companies.

If you want a little more freedom and choice, you can also opt for a version consisting of two ETFs. This gives you more influence over the weighting and allows you to adjust it yourself if necessary.

Here, it is common to invest 60 to 70 percent of your assets in an index for industrialised countries and 40 to 30 percent in securities for emerging markets.
This allows investors to achieve a high degree of diversification.
Investors spread their money across a variety of companies from different industries and countries, thereby reducing their risk.

Good to know:

A popular example is the MSCI World Index from various providers. This is a high-yield ETF that invests in the 1,600 largest companies in industrialised countries. The index is broadly diversified and is offered by various providers. It is worth comparing the ETF costs here.

Conclusion: Buying ETFs for beginners – how you can benefit from attractive return opportunities

ETFs are an exciting asset class. Their easy-to-understand functionality and low time commitment make them suitable for beginners. If investors adhere to the most important principles of investing, such as sufficient diversification, they are also a relatively safe asset class.

In addition, they are affordable and offer you the chance of high returns that can offset inflation and help you build wealth. However, you should also be aware of certain risks. These risks include poorly diversified thematic ETFs, price fluctuations, currency risks and synthetic replication, which gives rise to counterparty risk.

In this article, we have presented objective and subjective criteria that should be taken into account when making your selection. Objective aspects include ongoing costs and fund volume. Subjective criteria include the suitability for savings plans, the use of earnings and the sustainability of your investment.

But which ETFs are actually suitable for beginners? When you are just starting out, you should build up a portfolio that is as simple as possible. You can choose between two options: a portfolio consisting of one ETF or an investment in two ETFs. Consider industrialised and emerging markets to increase your diversification and reduce the risks associated with investing.

You may also be interested in the topics ‘ETFs for children’ or ‘Stocks or ETFs’ . Good luck with your investment! Find out more here.

FAQ – Frequently asked questions about ETFs for beginners

Is an ETF suitable for beginners?

This asset class is easy to understand and suitable for beginners. Investing in these securities offers a number of advantages and opportunities: ETFs offer the possibility of high diversification to increase security. They are also classified as special assets. They are an inexpensive asset class with attractive return opportunities that can help offset inflation. Unlike investing in stocks, they require little effort and hardly any time. All you need to do is learn the basics and set up your investment.

Buying ETFs for beginners: What should I look out for?

There are basically objective and subjective criteria for selecting a security. Objective criteria include ongoing costs in the form of the TER, fund volume, fund age, tracking error and tracking difference. Subjective aspects include suitability for savings plans, sustainability and the use of earnings.

Which ETF for beginners?

A portfolio for beginners should be as simple as possible. You can choose between a portfolio consisting of one or two ETFs. For a portfolio consisting of only one security, you can choose between the Vanguard FTSE All-World or the SPDR MSCI ACWI IMI. Both contain companies from industrialised and emerging markets. Alternatively, you can use two ETFs to cover industrialised and emerging markets. ETFs on the MSCI World are particularly suitable for building a broadly diversified portfolio.

ETFs for beginners – The comprehensive guide for 2025