Solar or ETF? Real asset and portfolio in an honest comparison

Few investment recommendations are as well evidenced as the broadly diversified equity ETF: low costs, daily tradability, exposure to more than a thousand companies. For the core of private wealth that is hard to beat, and this article does not try. The question investors with a well-filled portfolio actually ask us is a different one: what is the next allocation once the savings plan is running, the marginal tax rate sits at 42 or 45 % and the entire portfolio hangs on a single asset class? That is exactly where the direct investment in a photovoltaic plant or a battery storage facility comes in. This article puts the two side by side, with the portfolio's strengths first.

Is an ETF portfolio the better capital investment?

For the core of your wealth, generally yes. A globally diversified equity ETF delivers market returns at very low cost, can be traded any business day and works without expertise in individual projects. Anyone who does not yet have that core should build it first, not a direct investment. The two do not really compete either: the portfolio is the liquid, broadly diversified base; the energy direct investment is an illiquid, concentrated real asset with a revenue source outside the stock market and a tax lever that a securities portfolio structurally cannot offer. The question only becomes meaningful once both are true at the same time: the portfolio core is in place, and the ongoing tax burden is high enough that the timing of taxation becomes a source of return in its own right.

What does a broadly diversified portfolio do better?

Three things, and they carry weight. We name them first, because any comparison that skips them is dishonest:

• Liquidity: an ETF can be sold on any trading day, in partial amounts, without finding a buyer. A direct investment is a multi-year entrepreneurial commitment with no organised secondary market; anyone forced to exit early has a real problem.
• Diversification: the MSCI World holds 1,283 individual constituents from 23 developed markets. A single direct investment is one project at one site; that single-asset risk cannot be diversified away, only examined.
• Costs and entry: ETF savings plans start at double-digit monthly amounts with ongoing costs of a few tenths of a percent. A direct investment typically starts at around €100,000 of investment volume and carries structuring, operating and administration costs.

There is also a practical advantage: a portfolio requires no project due diligence. With a direct investment, the quality of the individual project matters more for the outcome than the asset class does; which questions to ask is covered in How to tell a trustworthy provider of energy direct investments.

Where does a securities portfolio hit its limits?

In two places that a higher savings rate cannot fix. The first is fiscal: what you pay into your portfolio reduces your taxable income by nothing at all. The portfolio works exclusively with already-taxed money, and the returns are taxed again later. For an investor at a 42 % marginal rate that means roughly 56 cents of every additional euro earned reach the savings plan. The second limit is structural: shares, equity funds and equity ETFs are the same asset class. They move together because they share the same market risk; in a correction the whole portfolio falls, no matter how many holdings it spreads across. The largest drawdown of the MSCI World since 1987 was 57.5 %, between October 2007 and March 2009.

What is striking is the usual answer to that second limit: a world index excluding the US, equal-weighted variants, an allocation to emerging markets. That shifts the weights within the asset class but removes no equity market risk; all of these building blocks fall in the same correction, only to differing degrees. Anyone seeking genuine diversification has to change the revenue source, not the index. Which real-asset families qualify for that at all is set out in Real assets as inflation protection: what actually protects and where energy assets fit in.

How much concentration risk sits in the MSCI World?

More than the name "World" suggests. According to the official factsheet as of 30 June 2026, 72.45 % of the index is made up of US companies, the ten largest positions together account for 25.74 %, and the technology sector alone stands for 30.27 %. An investor holding only the MSCI World therefore has a good seven tenths of their equity wealth in one economy and close to a quarter in ten companies. This is not a warning against the index; the concentration is the result of successful companies and has been well rewarded over long periods. The index returned around 9 % per year since the end of 1987, and the return triangle published by Deutsches Aktieninstitut shows an average of 8.6 % per year for 20-year savings plans, and still 2.2 % for the worst starting point (each before costs and taxes).

The honest counterpoint, however, is this: a single energy direct investment is far more concentrated as an individual project than any index. Its contribution to a portfolio lies not in diversification but in the fact that its revenues come from a different market. Electricity revenues follow feed-in tariffs, marketing contracts and the power price level, not sentiment on equity markets. Anyone wanting to turn that into a portfolio building block has to spread across several years and several projects; what that looks like in practice is described in Using the investment deduction every year: building a portfolio over multiple years.

Solar or ETF: where are the differences?

The differences lie in the tax effect, in liquidity, in where the returns come from and in the risk profile. The following overview puts the typical characteristics side by side:

How are an ETF and a direct investment taxed?

What does a portfolio investor pay?

Investment income is subject to the flat-rate capital gains tax of 25 % (§32d para. 1 EStG) plus a 5.5 % solidarity surcharge, so 26.375 % in total, plus church tax where applicable. Important for high earners: while the solidarity surcharge has largely been withdrawn for wage and income tax, it still applies to investment income in full and from the first euro; §3 para. 3 sentence 2 and §4 sentence 3 SolzG explicitly exclude the flat-rate tax from the exemption threshold and the phase-in zone. What stays untaxed is the saver's allowance of €1,000 per person and €2,000 for jointly assessed couples (§20 para. 9 EStG); with equity funds, the partial exemption of 30 % additionally reduces the tax base, so that roughly 18.5 % effectively applies to equity fund income.

The point many investors underestimate is the advance lump sum under §18 InvStG: even an accumulating ETF that distributes nothing triggers a tax payment each year. The tax base is the redemption price at the start of the year multiplied by 70 % of the base rate, capped at the actual increase in value over the year. For 2026 the Federal Ministry of Finance set the base rate at 3.20 % (circular of 13 January 2026), which yields a base income of 2.24 % of the opening value; for comparison, the base rate for 2025 was 2.53 %. The tax falls due on the first business day of the following year. If the personal tax rate is exceptionally below 25 %, the assessment option under §32d para. 6 EStG allows taxation at the ordinary rate on request; for the high-income audience considered here that is regularly not the case.

How do the §7g levers work for the participation?

The energy direct investment pulls its tax effect to the front. The investment deduction under §7g EStG allows up to 50 % of the planned investment to be deducted in advance, as early as the year before acquisition; the conditions that must be met are covered in Investitionsabzugsbetrag: all §7g EStG requirements, and who can use it. In the year of acquisition the 40 % special depreciation and the regular depreciation are added, and their interplay is broken down in Sonder-AfA §7g (5) vs. declining-balance AfA §7 (2): which combination, when?. The decisive difference to a portfolio contribution: these amounts work against the personal marginal tax rate, so against 44.31 % at 42 % plus solidarity surcharge, and against 47.475 % in the 45 % top bracket. In 2026 the 42 % rate starts at a taxable income of €69,879 and the 45 % rate at €277,826. How far that reduces the equity actually tied up is calculated in How much equity is actually required?.

The honest counterweight: the participation generates commercial income under §15 EStG. Ongoing returns and the later sale are taxed at the personal rate, not at the 26.375 % flat rate; there is no equivalent of flat-rate capital gains taxation here. Trade tax is added, which is offset in arithmetic terms up to a municipal multiplier of around 400 % by the €24,500 allowance (§11 GewStG) and the credit against income tax at a factor of 4.0 (§35 EStG); in cities with a higher multiplier a residual burden remains, and the credit is additionally capped at the trade tax actually paid and at the maximum relief amount. How returns and exit are taxed in detail is shown in After the IAB: How the ongoing returns and the sale of a direct investment are taxed. In short: the portfolio is fiscally simple and flat, the participation is strong at the front and fully taxed at the back. The advantage comes from timing and the difference in tax rates, not from permanent tax exemption.

Access is not limited to business owners: anyone running their own business invests through its business assets, while employees without a business can invest through an entrepreneurial participation that itself generates commercial income.

Is a direct investment riskier than an ETF?

The risk profiles differ; neither is categorically higher or lower. A broad ETF diversifies away most single-asset risk but carries the full market risk in exchange and fluctuates visibly. A direct investment carries a corresponding single-project risk: power price and revenue risk, technology and operations, financing and regulatory change. What that means specifically for storage projects is covered in Risks in BESS direct investments, and how they are structurally addressed.

On one point it is worth contradicting the common sales argument: the fact that a direct investment has no market price does not make it safer. It only makes it unobserved. Illiquid assets are valued rarely, so their fluctuation appears lower in calm periods than it economically is; that is a measurement artefact, not lower risk. Consumer protection bodies regularly point out that the apparent calm of illiquid investments conveys a false picture. The genuine advantage lies elsewhere: someone who does not see a daily price will not panic-sell into a correction, and investors expect an illiquidity premium for the multi-year commitment. What is being paid for is therefore not less risk, but the willingness to give up availability. Anyone who might need that capital during the term should not tie it up. What an early exit actually requires, and when it becomes expensive in tax terms, is described in Selling a direct investment early: how liquid an energy direct investment really is.

Do I have to sell my portfolio in order to invest?

No, and in practice hardly anyone does. The participation is typically the next allocation alongside an existing portfolio, not its replacement; selling fund units would also realise unrealised gains and trigger capital gains tax. As a rough orientation:

• The portfolio remains the first choice as long as the liquid core is still being built, the capital has to be available within a few years, or the personal tax rate is not clearly above the flat capital gains rate.
• The energy direct investment becomes interesting once the portfolio core is in place, a high ongoing tax burden at top-rate level applies, the investment horizon runs to ten years or more, and entrepreneurial risk is bearable.
• The two together spread across two different revenue sources: equity markets respond to the economic cycle and interest rates, the power market to generation, consumption and grid conditions.

Anyone looking for the comparison with other real assets will find it in Solar or property as an investment: an honest comparison of two real assets; how a direct investment differs from a closed-end fund is set out in Direct investment or closed-end fund? The structural comparison. What the interest account delivers in the same comparison is worked through in Solar or fixed-term deposit? Interest account and real asset in an honest comparison. Concrete entry routes are shown in Investing in solar parks: revenues, costs and tax leverage at a glance and Investing in battery storage: the options at a glance. We make no return promises: in a no-obligation initial conversation we work through your situation with disclosed assumptions instead, explicitly including the comparison with the simple alternative of putting the money into the savings plan.