Taxes & business banking for the self-employed


Are investment and stocks a good idea for freelancers and the self employed?

Kate Bailey

Freelance Editor

Mar 23, 2021

The news got, let’s say, weirder as we entered 2021. Gamestonks, Reddit, WallStreetBros - did you really ever think they would be relevant to you? Nope - same! What it did do however was point out an interesting means of passive income for freelancers and the self-employed who may find they have some to invest at a high point. No enterprise or person could advise another they should invest, but we want to take out some of the mystery of it in lights of the GameStop/AMC saga of 2021.

As many of us are now grappling with the long term unknowns of the Corona crisis it was indeed surprising to find our lives blanketed with news of the stock market. It is in fact something many of us as independent freelancers or self-employed people do not consider often because we have very little access to the market, not always due to a lack of funds but rather a lack of knowledge as to what it is even about.

There are actually a great deal of options when it comes to being a business and enhancing cash holdings through things like term-deposits or interest earnings accounts. This is very much in line with what is available personally. Beyond that, we are going to review some key concepts and options for you to consider as a potential investor. No GameStonks though - you'll have to follow Elon Musk on Twitter if you want terrible financial advice. We joke!


Real estate, stocks, ETFs. Like, what? Well, basically all of these constitute an investment strategy. After educating yourself only you choose what is right for you. Some investors swear by real estate, others by gold. And anyone who is familiar with the art world trades in paintings.

In doing this or essentially, in essence, collecting valuable commodities that increase in value over time, you are participating in securities investments and this allows you to concentrate on building up wealth with the help of securities. 

Exchange-Traded Funds (ETF)

For a long-term investment strategy and asset accumulation, there is a good motivation for ‘’beginners’’ and those looking to take smaller risks than say buying an apartment or similar. The big advantage compared to real estate: You can sell ETFs at any time without any problems. Not a house. A second big plus: You can invest in ETFs from as little as 25 euros per month. A small sum with a big impact.

An ETF ("Exchange Traded Fund") is an exchange-traded index fund that tracks the performance of an index such as the DAX. The DAX is an index that tracks the 30 largest listed companies in Germany. It is not a share, but a collection of shares or a display of them. There are funds that track these indices - such as a DAX ETF.

Basically, ETFs combine the advantages of stocks and funds in one product. A mutual fund is a collection point for investment funds. To put it bluntly, many investors pool their money and give a professional (fund manager) the task of investing the capital as profitably and widely diversified as possible within the framework of a given investment strategy.

ETFs enable you to invest cost-effectively in entire markets with one security. In addition to stocks, you can invest in many other asset classes with ETFs. Because of this diversity, ETFs are perfect building blocks for private investments. ETFs simply replicate a market index one-to-one and - like a share - can be traded on the stock exchange at any time.

The investment strategy specifies in which asset classes (e.g. stocks, bonds and commodities ) the fund manager can invest. The benefit of an investment fund is that the investor's money is a special fund that is held in trust by a custodian bank and is legally separated from the assets of the fund company.

Therefore, the investor's money is protected even if the fund company becomes insolvent. The manager of a classic mutual fund has the task of buying and selling investments to achieve a higher return than that of the respective benchmark index. However, according to scientific studies, only very few fund managers succeed in this in the long term (over a period of more than three years).

While ETFs are still new territory for many private investors, professionals have been using them for financial investments for years. For large investors such as pension funds and insurance companies, ETFs are an integral part of the portfolios. The awareness of ETFs is increasing rapidly. If you read the paper carefully, you will find that ETFs are covered very often.

Especially customers of online brokers are increasingly using ETFs for their investments. Because ETFs are also ideally suited for private investors who want to save in the long term.

Equity funds

Equity funds are actively managed. While an ETF acts automatically, in the case of equity funds, the management actively makes a decision for you whether or not to buy a stock. Questions like "Which companies could work in the current market trend?" and other factors taken into account. Advantages of the actively managed equity fund:

It can hold cash and possibly bring you a higher return than the passively managed ETF. However, such funds also have a corresponding fee. Your performance is controversial. For comparison: ETFs are passive funds and participate 1: 1 in industries. They are controlled automatically and are linked to indexes.

Your return, therefore, depends on the DAX or individual industries. Everything is automated. Fewer people are needed to manage the fund. This means you have lower costs than with a managed equity fund. 

Securities savings plan

If you want to invest and increase money permanently, the securities savings plan is an interesting option for you. If you choose this product, a fixed amount will be debited from your account at a certain interval and invested in funds, shares and certificates by your broker. The system then goes straight to your depot. Regular investing in securities is particularly easy with a savings plan.

nce you have determined the criteria - such as the amount of investment, the execution interval, the selection of securities and the term - the rest will run by itself. That saves a lot of time. Further advantages for you: The investment amount can be chosen low. Investing in a securities savings plan is worthwhile for as little as EUR 25 per month.

A savings plan is also a great entry-level product. It offers you the opportunity to get used to securities and to familiarize yourself with their trading. The high flexibility gives you additional security when trying out. Plus: You can suspend a savings plan at any time.

Accepting the risks

Certainly there are ways to minimize the risk of losses on the stock market. For example through the broad diversification of its investments - for example through investing in ETFs. However, there is no guarantee that you will not lose money. Tip: Put a nest egg in the amount of at least three net monthly salaries, which you can fall back on in difficult times.

Always only invest money that you don't really need at the moment and think long-term rather than speculative. Because: return and risk belong together. You can of course run a high risk and thus make more profit within a shorter time.  With this approach, however, the risk of losing the money invested is also higher. 

The reality is for many that even get to the point of considering investing takes hard work and a long struggle - unless you were born rich. But regardless it is important to know these options and bridge class gaps without mindless aspiration.

Overall, you are going to have a sense of if this is the right option for you. No one can ever say investments are right for you, or if you’re going to be comfortable with some classic German pension funds and savings. Regardless, the recent GameStop scandal not only showed how the system works to some extent, especially to individuals who have had little to do with it but it also showed us that because we have had little to do with it, we know very little about it.

As we discussed today, there are options with varying degrees of risk that will suit you differently at different points in your life and we hope we have been able to provide a robust overview of that for you.