Glossary of savings terms

Learn the lingo

Understanding the language used around saving and investing may sometimes be difficult. But worry no more – we have put together a glossary to help guide you through the most common terms.

Accounts, equities and funds

Accounts, equities and funds

Current account and savings account

A current account or a disposal account is a deposit account designed for managing your day-to-day finances. A savings account is meant for your savings and you can choose between a continuous or fixed-term savings account.  

Book-entry account

Book-entry securities are investments such as shares and bonds whose ownership is recorded electronically. 

Book-entry account and safe custody

An investor’s personal custody account for their book-entry and other securities. Book-entry securities are recorded in the customer’s book-entry account. Before you buy shares or other securities for the first time, your bank or brokerage company will conclude a safe custody agreement for you. You may open a separate equity savings account instead of or alongside a book-entry account.

Equity savings account

The equity savings account is a new type of account introduced on 1 January 2020. You can trade in listed shares with an equity savings account without having to instantly pay taxes on your returns from trading. Dividends also will not be taxed at the time they are paid into the equity savings account, so you can re-invest your dividend yields in full. (NB. Tax-at-source may be levied on dividends from foreign equities.) You only pay taxes on your returns once you withdraw assets from your equity savings account.

Asset class

Equities, fixed income instruments and cash are examples of asset classes. 

Security

Security is a general term for a certificate or book-entry security such as a share, investment fund unit or bond.

Share

A share represents a proportion of a limited liability company’s share capital. The share capital is divided into a certain number of shares. Shares are securities that the shareholder can usually sell or otherwise transfer to another person. A listed company’s shares are publicly traded on stock exchanges. This means you can buy or sell such shares in Nordea Netbank, for example. 

Limited liability company

Shares represent ownership interest held by shareholders in a limited liability company. A limited liability company is a company form. Its ownership is divided into a certain number of shares. In other words, shareholders get a number of shares that corresponds to the amount they have invested. The assets invested in the company by its owners comprise the share capital of the company. 

Share price

The price of shares fluctuates. Anyone can buy and sell the shares of a listed company on a stock exchange. The price of a company’s share on a stock exchange is determined by supply and demand. Listed companies often have thousands of shareholders – many of them regular savers, i.e. small investors. When more people want to buy the share than to sell it, the share price goes up. And when more people want to sell the share than to buy it, the price goes down. This is called share price performance. 

Dividend

A dividend is the distribution of a portion of the company’s earnings to its shareholders. If the company decides to distribute a portion of its earnings to its shareholders, each shareholder receives a dividend yield in proportion to their shareholding. Dividends are expressed as dividend per share. They are not always distributed, for example, if a company is doing poorly.

Fund, investment fund

An investment fund is made up of a big pool of money collected from many investors. Different types of funds invest in different types of markets. For example, a fixed-income fund mainly invests in the fixed-income market and an equity fund mainly invests in equities. A fund that invests in both the fixed-income market and the equity market is called a balanced fund. An investment fund may be a good option for beginner investors, as the fund is managed by professionals. This means that the investors do not have to monitor the markets or companies as closely as, for example, when investing directly in equities.

Fund units

The money in a fund is divided into equal shares that are called fund units. This means that each fund unit corresponds to a share of the fund’s total assets. When you invest in a fund, you are buying fund units. When you invest in a limited liability company, you are buying shares.

Fund saving

A way of saving in which you buy fund units with your savings. If you want to save in funds, you can invest a larger one-time lump sum or smaller amounts regularly – for example 20 euros a month. Monthly saving is a good way to grow your wealth in the long term.

Investing
Interest and return