Financial Terms Glossary: Part 2

Knock-outs

With knock-out products, you participate disproportionately - depending on the selected leverage - in price movements of a certain underlying. If the underlying asset falls below the knock-out threshold, the product expires worthless.

Limit order

A securities order can be placed with or without a limit. If you buy without a limit (i.e. by market order), you pay the price that is currently demanded by the market. By contrast, when you submit a limit buy order, you specify to buy a security only up to a certain price. Limit orders can also be placed for sales if you want to achieve a minimum price for your investment.

Market capitalisation

Market capitalisation is the stock market value of a company. It is calculated by multiplying the number of outstanding shares by the share price. Market capitalisation is a typical measure of a company's size and often a criterion for whether a stock is included in an index.

Non-assessment certificate

A certificate of non-assessment (Nichtveranlagungsbescheinigung, NV certificate) is issued by the tax office if income remains below the basic allowance, meaning no income tax is due. For children, the child allowance applies as well, which further increases the tax-free amount.

In principle, investment income – such as interest, dividends from stocks or ETFs, or capital gains – is subject to the final withholding tax. However, if an non-assessment certificate is in place, these earnings are paid out in full without any tax deduction. A tax exemption order (Freistellungsauftrag) is therefore no longer required.

The non-assessment certificate is usually valid for up to three years and must then be reapplied for. The application is submitted to the responsible tax office using form NV 1 A. (As of 2025)

Overnight deposit

An overnight deposit is a short-term savings account without a fixed term. The investment is linked to a variable interest rate meaning the bank may raise or lower the interest rate at any time, in response to shifts in the financial market. The interest return is geared to the market interest rate, amongst, which allows the return on the deposit to fluctuate with the current economic environment. This provides a dynamic earning potential that is not locked in for a set period. Overnight deposits offer high liquidity as funds can be withdrawn from the account at any time.

Physically replicating ETFs

In simple terms, a physically replicating ETF (exchange traded fund) does as the name suggests. It is an index funds that track an index by purchasing either all or large portions of the individual securities contained therein (e.g. shares or bonds) according to their weighting.
A 100% replication by a physically replicating ETF is also referred to as full replication, while a partial replication is referred to as partial replication (sampling). In sampling, representative index stocks are selected for replication. During optimisation, stocks with the highest correlation to the index are used. However, these do not necessarily have to be securities from the index.

Private Equity (PE)

Private equity (PE) refers to investments in privately held companies. There are significantly more private companies than the few thousand publicly traded ones out there. The PE universe is encompassing millions of businesses, from startups and small enterprises to more established firms that have chosen not to go public. Though conceptually similar to equity securities in publicly traded companies, private equity investments are distinct enough in form and characteristics to be considered a separate asset class.
Private equity investments are high-risk and less liquid compared to public market investments, but they offer the potential for substantial returns due to their investment nature. Typical exit strategies for investors include initial public offerings (IPOs), sales to strategic buyers or secondary buyouts. Retail investors can invest in private equity via certain ELTIFs.

Private Markets (PM)

Private markets (PM) is the umbrella term for not publicly tradable investments like private equity, private debt, real estate and infrastructure projects. These investments were typically reserved to institutional investors or high-net-worth individuals only, but are now also available to retail investors via ELTIFs due to a regulatory overhaul by the European Union in early 2024. Private markets offer opportunities for higher returns and diversification but also involve higher risk and lower liquidity compared to public markets. Investors in private markets often need to commit capital for longer periods and may have limited opportunities to sell their investments before maturity.

Subgroups of private markets:

• Private equity: investments in private companies or the buy-out of public companies

• Private credit: lending money to private companies in return for interest payments

• Real estate: investments in residential, commercial or industrial properties

• Infrastructure: investments in physical assets such as roads, bridges or renewable energy installations

Progressive tax rate

The progressive tax rate describes the principle of the German income tax: as taxable income rises, the tax rate also rises. This means that higher incomes are taxed at a higher percentage than lower ones.

The basis is always the so-called taxable income, which is shown on the tax assessment notice. It determines which tax rate applies.

Two values are relevant here:

• The marginal tax rate shows how heavily an additionally earned euro is taxed.

• The average tax rate indicates which proportion of the total taxable income is actually paid as tax.

The individual income tax can be calculated using the Federal Ministry of Finance's calculation tools (BMF).