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What are investment funds and why should I invest in them?

An investment fund refers to an investment product consisting of a portfolio of securities. The people who have invested in the fund own the portfolio jointly in proportion to the number of fund units they hold. It’s basically a huge piggy bank that individual investors contribute to. In return for your investment in the fund, you are allocated fund units in proportion to the size of your investment. Investing in funds is easy since they are managed by a professional portfolio manager who looks after your investments on your behalf. This means you don’t have to spend time monitoring the markets. You can get started with as little as 10 euros a month.

When choosing a fund, it is good to remember that expected return and risk go hand in hand. Low-risk funds have lower expected returns than high-risk funds. 

How can I start investing or saving in funds?

Remember that investing in funds does not commit you to anything or tie up your money. You can take out your savings or change your savings amount at any point if you need to.

Inspiration for saving

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Save in funds with specific sustainability criteria

Saving in funds with specific sustainability criteria can mean that you make your money grow without compromising on factors relating to environmental, social and governance issues (ESG).

Nordea offers a broad range of funds that apply specific sustainability criteria. However, these can vary depending on the fund and the market in which it invests. All funds managed by Nordea are covered by our work within responsible investment, meaning that they apply fundamental ESG criteria. Read more how sustainability is included in portfolio management.

However, we also offer several funds that have specific sustainability criteria and, to make your choice easier, we have selected funds within our Nordea Sustainable Selection.

Funds for savers

Funds for savers are the right choice for you if you feel that following the markets and investments is too time-consuming or laborious.

Read more about funds for savers

Sustainable balanced funds

Save in funds where sustainability matters. Choose a fund from our new Sustainable Selection that suits you best.

Read more about Sustainable balanced funds

Stars Funds

The Stars empower investors to make a difference by investing in responsible companies

Read more about Stars Funds

Nordea Innovation Stars

A fund that invests in innovative companies in the health care, technology and sustainable solutions sectors and follows Nordea’s established STARS concept.

Read more about Nordea Innovation Stars

Nordea Global Gender Diversity Fund

Nordea Global Gender Diversity Fund invests globally in companies with attractive valuations, which promote gender equality in areas such as recruitment, employment conditions and management.

Read more about Nordea Global Gender Diversity Fund

Forest funds, real estate funds and other partner funds

We work with our partners to offer you high-quality funds with different themes. You can invest in forests, commercial properties, water and climate, for example.

Read more about our partner funds

ETFs

Read about exchange traded funds (ETFs) and how to invest in them

Read more about ETFs

Index funds

Read about index funds and how to invest in them.

Read more about index funds

Thematic investing and megatrends

Read about thematic investing and megatrends

Read more about thematic investing

Fund fees

A subscription fee is charged on a subscription (purchase) of fund units and a redemption fee on a redemption (sale) of fund units. You can subscribe for fund units for a reduced fee via Netbank. 

Each fund pays the fund management company a management fee, which covers such fund management costs as value calculation, accounting and reporting. 

The amount of the management fee is given as an annual fee. The management fee is deducted in the calculation of the daily net asset value per fund unit, and is thus not charged separately. The fee includes a custody fee for fund units. 

You can view the fees for each fund in Funds Now.

Taxation of funds

Funds are taxed in accordance with the principles of capital taxation.

  • The return on fund units is capital income.
  • You are also liable to pay capital income tax on any capital gains you accrue from selling fund units.
  • The tax rate for capital income is 30% for up to 30,000 euros and 34% for the exceeding amount.
  • For more information about the taxation of funds, please visit the Tax Administration’s website at vero.fi.
  • Further information is also available in the Finnish Foundation for Share Promotion’s Tax Guide for Investors.

What types of funds are there?

There are several types of investment funds, focusing on different financial assets.

Different funds have a wide array of investment policies and investment targets. You can also choose between different kinds of fund units, namely growth and distribution units.

The main types of investment funds are equity funds, balanced funds, long-term fixed-income funds and short-term fixed-income funds.

Equity funds invest at least 50% of their capital in company shares. They may focus on companies in a particular country or geographical region, for example Europe or the Far East, or invest globally. Equity funds may also focus on companies in a particular industry, such as IT or pharmaceuticals. Balanced funds invest in both equities and fixed-income securities, while short and long-term fixed-income funds focus on specific parts of the fixed-income market. The investment policy and special characteristics of each fund are detailed in the fund’s key investor information document. 

Funds can also have different types of fund units, often called distribution and growth units. The type of unit you hold determines how any income generated from the fund's underlying investments is treated and how your investments are taxed. With distribution units, income is paid out to unitholders annually, decreasing the value of the units correspondingly. With growth units, income is retained within the fund and reinvested, increasing the value of the units. You can find more information about the units of investment funds below on this page. 

Fixed-income funds

Funds investing in fixed-income products, i.e. fixed-income funds, are an alternative to direct fixed-income investments, such as bonds. When you invest in a fixed-income fund, you get a package of investments even with a small sum. By diversifying your investments this way, you can expect a higher return on your investments.

Read more about fixed-income funds

Equity funds

Equity funds invest mainly in equities and are most suitable as a long-term investment in place of or alongside direct investments in equities. The funds spread their assets over a range of investments to reduce investment risks.

Read more about equity funds

Balanced funds

Balanced funds invest in both equities and fixed-income securities. They are suitable for you if you want investment experts to monitor the markets and manage your investments on your behalf.

Read more about balanced funds

What are active and passive funds?

Active funds are suitable for you if you want investment experts to monitor the markets and manage your investments on your behalf. An active fund seeks to outperform its benchmark index and provide a higher return than the index. 

When investing in a passive fund, such as an index fund, you need to be a bit more proactive than with active fund investments. In an active fund a fund manager will monitor the markets actively and make decisions to buy and sell based on that, but if you invest in a passive index fund, you have to make those decisions yourself. It’s also good to keep in mind that index funds are passive shareholders that don’t punish the managements of companies for making errors, which means the funds’ sustainability rating is not very high. 

Read more about active and passive funds in Nordea Funds Magazine

How do investment funds work?

The way an investment fund works is that the fund management company collects money from multiple investors and invests it in various assets, which make up the fund. Investment funds enable small investors to enjoy advantages otherwise reserved for big investors. Funds also provide a flexible alternative for investors, as they offer both risk diversification and regular portfolio management.

The investors own the fund, and the fund invests their money in securities. To have a stake in the fund, investors need to buy fund units. Each fund unit represents a share of the fund’s total assets.

Diversification in an investment fund

The biggest advantage offered by funds is risk diversification. Some funds diversify risk by investing in as many as 400 different securities (stocks or bonds). By buying fund units, investors automatically get an investment portfolio that is diversified in accordance with the fund’s rules.

Investors can choose a fund that best corresponds to their own risk profile, interests and planned period for investment.

By pooling together the assets of many investors, funds can purchase shares from various companies, sectors, countries and regions as well as bonds of varying maturities. Investments in funds are often a good alternative to purchasing such securities directly, as a fund offers risk diversification regardless of the sum invested.

Fund units

Investment funds are divided into fund units of equal size, which give their unitholders equal rights to the fund’s assets. A fund’s investment portfolio comprises various different securities, while investors buy units in the fund. Each fund has its own investment principles and invests in various securities combined in different ways.

A fund’s investment portfolio is updated based on the insights of experts who actively follow the securities and financial markets. However, investors should also keep an eye on their fund investments at regular intervals to ensure that, for example, the allocation of equity and fixed-income investments suits their needs.

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