Problematic prices in the south of Munich

Now I am certainly not a financial expert as some here seem to be. Nevertheless, I like to remind that at the time of our house construction, a 1% repayment was considered standard because interest rates were already close to 10%. The advertised sales value of our house was suddenly 40% BELOW the construction cost back then, and no one was interested in the house at that price; it was practically unsellable. Luckily, because in the following years this changed significantly and 10 years later I was able to choose the buyer at the desired price. Of course, it is most likely that prices will continue to go up and higher... and yet it often turns out differently; it remains a crystal ball, even if it is described in a flowery and pleasing way or supported by calculations. The younger generation here has apparently mostly only seen rises... therefore I would always also consider the worst-case scenario, and after that, you can still decide to realize it.

And such a scenario is of course also within the realm of possibility, even if the overwhelming majority here does not believe it. Not tomorrow, the day after tomorrow, or in 2 years, but most financings still run for at least another 10 years. If at this unfavorable time a separation/divorce is also pending and one is forced to sell, well then good night. Then both parties go into personal bankruptcy, or they somehow arrange themselves and continue to live under the same roof. And whoever now thinks that this won't happen to them should just take a look at the divorce rate in Germany. The 38.5% from last year probably also would not have thought on their wedding day that it would "hit" exactly them.

Real estate prices are indeed problematic, even for people with a good income. That is the result of federal German policy over the past 20 years.

No - that is the result of European policy from Brussels and that of the ECB. Okay, the ECB is based in Frankfurt and thus in the FRG: however, the Bundesbank has the same voting weight there as the Republic of Malta (with fewer inhabitants than Frankfurt BTW).

On the one hand, I find the calculation very bold. We have a joint net income of €10k – and that’s now, not sometime in the future – and in recent years we have saved up €400k in equity. We set ourselves a rough budget of €1.5 million, then we end up with a rate of about €3500/month and thanks to bonuses etc. there is room for special repayments. I already find us bold because nothing can really go wrong. If one of us loses their job, becomes seriously ill long-term, etc., then we would probably have to sell. The same applies in case of a separation. Secondly, I wonder if you even have a chance to find something with that budget. We are in the north of Munich, everything that is reasonably well connected and under €1 million goes very quickly, you have to say yes immediately and have the financing already clarified. In that price range, there are many leasehold properties where you pay €800k or more just for the old house. Further out, there are semi-detached or terraced houses for €700-800k but they are really far out and I am sure that on top of the prices mentioned there will be quite a lot more ("[Ausbauhaus]" or just "[normale]" ancillary building costs). I don’t know how far outside you are, but if you want to have a chance of finding something, I think you would have to get out of the south.

Besides a disproportionate price development of real estate in recent years, the other side of the problem is that we tend to want a little more than we can currently have and thus put ourselves in a hamster wheel of work and latent dissatisfaction. If we were to step out of that, prices would also drop again. Don’t get me wrong, I think it’s wonderful when people have ambitious goals and strive for them – as long as they come from within rather than a supposed “normality” or even a comparison with others. Demands cannot only be turned up or down – which already involves a judgment – but managed for oneself. Real problems only arise for those who are excluded from participating in the housing market (whether renting or buying). : I wish you a bit of fortune and the right attitude to find something in which you feel great. The wishes don’t quite match your financial situation yet – but with a bit of willingness to take risks, something can also be achieved for you in the south of Munich.

Do you understand what an ETF is?

ETFs are, as long as they do not exceed a critical mass in the market and there is no real financial crisis, the almost perfect investment vehicle. So far, so clear. Disadvantages compared to a sufficiently diversified larger number of directly held individual company stocks spread across countries, sectors, and risk profiles:
- In some indices like the S&P 500 and MSCI World, a large portion of the index is held by ETFs. These may trade automatically during market disruptions such as short squeezes, which can lead to losses. Furthermore, there is an almost preprogrammed disadvantage when the index composition changes.
- Synthetic ETFs carry a risk if a counterparty fails.
- The vast majority of ETFs, including physically invested ones, are allowed to lend a certain portion of the stocks, for example to short sellers and other speculators. If these default, part of the ETF could fail.

You don’t have any of these disadvantages with direct investments in individual stocks, but there are issues with double taxation in certain countries and the risk of insufficient diversification.

But if you are as much of a professional as it seems, you can surely completely refute all these points and explain to me why ETFs are absolutely and entirely superior in every respect compared to broadly diversified direct stocks.

I didn’t write, “just no ETFs.” I wrote that a certain portion in direct company stocks can indeed make sense from a risk perspective.

And I'm not talking about Hans Hinterhuber, who just wants to invest 5k€ in the stock market. For him, ETFs might actually be superior to individual stocks. But with >50 to several 100k€, as the OP seems to plan, you can nicely spread over the market in, for example, 2-3k€ packages. In a few ETFs, different individual stocks, and depending on risk tolerance, also other forms of investment. All in ETFs would be a bit too risky for my taste at such a volume. There was a study that said that with at least 8 to 10 different individual stocks, investing in a comparable ETF no longer brings significant diversification and risk advantages. But you can gladly discuss in detail where this number really lies and whether individual stocks really make sense in all markets.