Just like anything else you own, investments need to be stored somewhere. You have a few options, and each one suits different investment goals. The right choice depends on what you want to invest in and how long you plan to invest for.
Think of a book-entry account as your wardrobe: it holds shirts, trousers and dresses for every occasion. Likewise, a book-entry account lets you store shares, exchange-traded funds (ETFs) and other securities all in one place. With a book-entry account, you can trade in any listed product on the stock exchange.
An equity savings account is more like a separate wardrobe just for knitwear. Unlike a book-entry account, it only allows you to hold shares. Another key difference is taxation. You can trade shares within the account, and any gains and dividends grow tax-free for as long as you keep the money in the account. You can invest up to 100,000 euros, and you may open only one equity savings account with only one bank.
If you want broad diversification across shares and ETFs, a book-entry account is the better option. If you plan to focus solely on shares and invest for the long term, an equity savings account may be more attractive due to its tax benefits. Many investors use both accounts side by side for different purposes.
Read more about the differences between a book-entry account and an equity savings account
Unit-linked insurance works in a similar way to an equity savings account, but instead of listed shares, it offers access to funds, ETFs and diversified investment baskets. It acts as an “insurance wrapper” for the investments of your choice. Unit-linked insurance is an insurance contract designed for long-term saving and investing, allowing you to switch between investments at any time without immediate tax implications.
Once you’ve opened your chosen account, you’re ready to get started. But what should you consider before placing a trade? And what about when selling? Just as you would check the material and care instructions before buying clothes, take the time to review the details of the shares or ETFs you are considering.
Select the share or ETF you want, decide how much to invest and confirm the trade. You can either buy at the current market price or place a limit order, where you set the maximum price you’re willing to pay.
Before placing an order, it’s worth reviewing factors such as the company’s dividend history, growth plan and prospects, exposure to megatrends and key financial figures. If this feels challenging, stay tuned for our next term when we will look deeper into analysing individual shares and other factors affecting buy decisions.
For ETFs, the key information document outlines the product’s essential features, risks, charges and other costs. It may make it easier to compare alternatives before placing an order.
When you sell, you choose what to sell, set the quantity and price (or amount) and confirm the transaction. The proceeds are typically credited to your account within a few days. Selling shares may result in a gain or a loss, and gains are generally taxable income.
In the autumn term of the Investor Collective, we will also look at the factors affecting decisions to sell in more detail.
A market order is like saying to the vendor “I’ll take it at today’s price”, whereas a limit order is like saying “I’ll buy only if the price is X euros or lower”. A limit order can offer more control, but the trade may not be executed if your target price is not reached.
As the saying goes, nothing is truly free. Trading on the stock exchange involves costs, but when you understand what you’re paying for and why, there are no surprises. Each buy and sell transaction incurs a brokerage fee, but you can think of it as an investment that will pay itself back over the long term.
Each trade incurs a brokerage fee, either a fixed amount (for example, 8 euros) or a percentage of the traded value. This applies to both selling and buying. Trades on foreign stock exchanges are usually more expensive than trades on the Finnish stock exchange.
The size of your investment also matters: a fixed fee takes up a larger proportion of smaller trades. To address this, some service providers apply a fee cap on smaller trades.
Example (a fixed brokerage fee of 8 euros):
That’s why, especially when investing smaller amounts, it’s important to pay attention to pricing and trade frequency.
If you trade in other currencies than the euro, you will incur currency conversion costs for the trades. If you trade infrequently, you may need to pay custody fees.
The costs of ETFs vary depending on the fund type, as different funds have different costs. The amount of the management fee, for example, is influenced by such factors as the markets the fund invests in.
With unit-linked insurance, costs depend on your investment amount and choices.
If you make smaller investments, the relative impact of the brokerage fee is greater, so pricing matters even more. At Nordea, you can trade in shares and ETFs at low cost even when investing less than 800 euros: on Nordic exchanges, the brokerage fee is always capped at 1% of the trade. The same 1% fee cap also applies to all ETFs. For example, for a trade of 100 euros, you will only pay a brokerage fee of 1 euro.
Taxes are an inevitable part of investing – the key is knowing when and how much you need to pay. This depends on which investment account you have and when you withdraw money. When you understand the basics of taxation, you can make smarter choices and avoid unpleasant surprises with checking your tax return.
When you sell shares at a profit or receive dividends through a book-entry account, you pay tax immediately. The tax amount due depends on the currently valid rules applied to capital income taxation. If you sell shares at a loss, you can offset the losses against your gains.
Within an equity savings account, you can buy and sell shares freely without immediate tax consequences. Taxation is triggered only when you withdraw funds, allowing your returns and dividends to compound over time. This enables you to take full advantage of the effect of compounding in the long term.
With foreign shareholdings, you may risk double taxation, as you will not get a refund on any withholding tax levied on the dividends paid into your equity savings account. This means that the dividends could be taxed both in Finland and abroad. If you want to diversify your portfolio by investing in foreign dividend stocks in particular, a book-entry account could be a better choice for these holdings.
Dividends are a company’s way of rewarding its owners. In simple terms, it is the share of company profits a company distributes to its shareholders. The amount is decided at the company’s annual general meeting based on the board of directors’ proposal, and it depends on the company’s profits from the current and previous financial years. Dividend yield is the figure that shows the dividend as a percentage of the share price.
Dividends are typically paid once a year in the spring, but some companies pay them more frequently over the year.
You should remember that dividends are not guaranteed. If the company has a bad year, it may decide not to distribute any dividend. You will also need to pay tax on the dividends you receive.
Now that you understand how trading works in practice, you’re ready for the next step. You know how to choose the appropriate account, what trading costs and how taxation works, but how do you build an investment plan that suits you? That’s exactly what we’ll cover next: how to create a plan that guides your decisions and helps you stay on track, even when the markets fluctuate.
The link to the lesson will be published soon.
This is an advertisement. The information provided on this website is intended as general product information only and does not constitute investment advice or recommendations. Past performance is not a guarantee of future results. The value of investment products may increase or decrease due to market movements, and it is not certain that you will get back the entire amount you invested. Before making any investment decisions, you should read the relevant prospectus and key investor information documents for more details about the investment product.
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