Buy certificates – only from trusted issuers
From a purely legal point of view, certificates are bearer bonds that are traded on the stock exchange. For the investor, this means that by buying a certificate, he is lending money to the issuer of the bond. Listed certificates are issued by banks, which are also referred to as issuers. There are tens of thousands of different certificates on the stock exchange, issued by issuers such as Deutsche Bank, the Societe Generale*UBS or other institutions.
As an investor, you can buy certificates on the stock exchange or from the issuing bank. Each certificate has a unique securities identification number (WKN or ISIN), which you must specify when trading the certificate, i.e. in your buy or sell order.
What most certificates have in common is that their price development is linked to an underlying value to which the security relates. This can be a share, for example the Daimler or BASF share. But it can also be a stock index such as the DAX, the Euro Stoxx 50 or the Dow Jones. Certificates on investment strategies created by the banks themselves can also be interesting. Examples include the CROCI certificates from db-X markets or the certificate on the QIX Germany from UBS8th, in which finanzen.net was also involved in developing the index. In addition, investors can also rely on actively managed investments, for example with the certificate on the Value Stars Germany Index4which relies on particularly promising second-line stocks and has had amazing success since it was launched in 2013 (article on the Value Stars certificate4).
There are also certificates on currencies, for example on the euro-dollar ratio or the exchange rate between the euro and the pound sterling. Commodities can also serve as an underlying, such as gold, silver, oil, but also coffee or orange juice, to name just a few. Overall you stand out loud German Derivatives Association (DDV) around one million tradable certificates on more than 3,000 underlyings, with which any stock exchange strategy, no matter how unusual, can be implemented. According to the DDV, the market volume for certificates was around 68 billion euros in January 2016 alone.
Tip: Certificates are bearer bonds. If the issuer of the certificate goes bankrupt, your claim against the issuer and thus your certificate is worthless. Therefore, only purchase certificates from issuers that you classify as trustworthy. This is usually the case with banks. Nevertheless, there have already been cases in which even well-known investment banks such as the US bank Lehman Brothers slipped into difficulties and bankruptcy and the certificate buyers had to accept severe losses up to total loss.