How do fund and equity investments differ?

Both funds and equities offer good returns in the long term. So what’s the difference? You can compare this decision with buying a cake versus buying the ingredients and baking the cake yourself.

Investing in a fund is like buying a cake. When you invest in a fund, you get a complete package compiled by the fund management company. It’s a convenient solution if you don’t want to spend a lot of time managing your investments and prefer to have experts make the investment decisions for you. You can select from different types of funds. For example, an equity fund mainly invests in equities and a bond fund mainly in the bond market. A fund that invests in both the bond market and the equity market is called a balanced fund. When you invest in a fund, you are buying fund units.

When you invest in a limited liability company, you are buying shares. A share represents the investor’s stake in an individual company. When you buy shares, you need to compile your own package in order to diversify your risks. Investing in equities requires a little more knowledge and a keener focus than investing in funds.

  • If you want, you can start saving in both funds and equities and divide your assets between them as you wish. And if you would like to buy a different type of cake, you might want to look into insurance-based investments

Where to invest in uncertain markets?

Even amongst market uncertainty you can easily diversify your investments by saving into a fund each month. See our fund selection to find the funds that suit your risk level and investment horizon the best. Discover the benefits of monthly saving.

When should I invest in funds?

Investing in funds allows you to diversify the risk involved in your investment. A fund consists of various equities, which means you are investing in several companies instead of just one. As a unitholder in a fund, you indirectly own a stake in each company whose equities are included in the fund.

The fund is managed by a management company, which constantly analyses the stock market and buys and sells equities based on its analyses.

The management company diversifies the risks on your behalf, which means that the performance of an individual company’s share price affects your investment less than in direct equity investments. You pay the management company a management fee, the amount of which depends on the fund.

Saving in funds is the right choice for you, if you:

  • want easy diversification without sacrificing returns
  • prefer to have the fund manager manage your investments on your behalf
  • want to spend your time on other things besides investing.

Read more about the benefits of saving in funds and why you should consider it.

When should I invest in equities?

When you invest in funds, the fund manager will invest your money in various securities. But with direct equity investments, you will have to choose the companies yourself. The risks may be higher compared to funds and you will also need to spend a little more time managing your investments.

The upside is that you don’t have to pay a management fee as you do with funds. Instead, you will pay a brokerage fee for each trade. The brokerage fee charged by Nordea is one of the lowest on the market.

The expected return of direct equity investments may also be higher than that of funds. On the other hand, you need to follow the stock market to know when it’s the right time to buy and sell.

Investing in equities is the right choice for you, if you:

  • are interested in market developments and want to spend time on managing your investments
  • want to choose your investments yourself
  • seek higher returns than what funds offer.

If you want to trade in equities, you first need a book-entry account or an equity savings account.

Read more about investing in equities and how to get strarted.

Past performance is not a guarantee of future results

When it comes to funds or equities, past performance is not a guarantee of future results. The value of fund units or equities may increase or decrease due to market movements, and it is not certain that you will get back the entire amount you invested.