Investing may sound like a foreign and complicated concept to many of us, especially for foreigners in Finland. In this article, VPF will briefly introduce you to some of the most popular investment options available in Finland.

Saving accounts – easy but not attractive in the long run

A saving account is an easy way to safely store your money but perhaps not so profitable in the long run. In Finland, opening a saving account is relatively easy. In most cases, it is possible to open one online via your bank’s website without any fee. As most bank accounts in Finland are insured by the deposit guarantee scheme of up to €100 000, saving account is considered one of the safest options to grow your money. However, the only downside in having savings accounts is that the return rate is extremely low (0.05% to 2%, depending on the bank). It is also worth noticing that a profitable interest rate should be higher than the inflation rate. In the current macroeconomic situation in Finland where low interest rates are expected to continue, the question is whether putting our money in these saving accounts is an attractive option.

In Finland, you can open an ASP account to save for your first home. You can begin saving between the age of 15 and 39. The benefit of this account is that you will be paid interest of 1% per year, tax-free. When your savings reaches 10% of your future home’s sale price, the bank will give you a loan for the remainder in the form of an ASP loan. Note that the minimum ASP saving period is two years.

Real estate – long term investment but require more knowledge of the local market

Real estate has always been an attractive means of investment with no exception to Finland. Owning a home in Finland is quite different than in many other parts of the world, including Vietnam. When you buy an apartment/house in Finland, you are most of the time buying specific shares connecting to that apartment/house, from the housing company/cooperative which oversees the maintenance of that building or that group of houses. You can still buy the actual real estate in Finland, which is usually the case when you buy a single detached house on its own land plot (omakoti). You can use websites like Etuovi or Oikotie to search for a home in Finland. Finnish government and banks offer many attractive incentives for first home-buyers such as tax redemption and lower down payment requirements. When you want to have a loan from the bank to buy your home, it is a good idea to talk to all the banks out there and negotiate the interest rates that work best for you. 

According to KTI Finland, there has been a big gap regarding the price growth for properties in the Uusimaa region and for properties located in other parts of Finland. The Finnish real estate industry has started to see the impacts from the Covid-19 pandemic as both volume and growth are slowing down this year. Making quick profits from real estate investments during these times may not be viable. However, especially for first time home-owners who purchase the properties to be used as their main residence, it is still a logical option to accumulate capital in the long run.

Mutual funds and exchange-traded funds (ETFs) – good option for starting investors

Mutual funds and ETFs are good options for those who just start to look for alternatives to generate higher returns. Both are pools of money where investors contribute their parts by buying shares. However, there are some differences between the two terms. Mutual funds are usually more tailored for those who are interested in longer term and specific investing strategies aiming to beat the market. Therefore, mutual funds are usually actively managed with a higher fee. ETFs, on the other hand, are very efficient instruments geared at tracking the general market performance or getting exposed to a specific industry or geographic coverage. As a result, most ETFs are passively managed, coming at lower fees but investors are fully exposed to the risks of the markets that they track.

Mutual funds and ETFs are extremely helpful instruments as they allow retail investors to invest in a portfolio of financial products including multiple company stocks, bonds and other financial instruments. They can significantly help to reduce risks on your investment. A lot of banks in Finland offer this kind of investment. When you have a bank account in e.g. Nordea, OP or Danske Bank,  you normally can have access to investing in mutual funds and ETF. In the long run, it is good to do the research and decide if mutual funds or ETFs are more suitable for one’s investment strategy.

Stock market: investing in individual companies for more savvy investors

For savvy investors, the stock market is a popular way of investing, which has huge potentials and risks at the same time. One can invest in companies such as Google, Microsoft or Coca Cola by buying their shares from the public stock market. By owning the shares, you also own a fraction of the corporation and make profits through dividends or capital gains from buying and selling the stocks. Popular platforms for stock investing available in Finland may include Nordnet, Degiro or eToro. Other platforms that are worth checking out include Robinhood and Interactive Brokers.

Many investors have dreamt of riding the waves on the stock market and eventually, emerging victorious. Since the financial crisis in 2008 – 2009, the stock market has recovered and started one of the longest rallies in history. However, the relatively high return rate also implies a higher level of risk of losing money on the stock market as you are fully exposed to the risks of the companies you are buying. It is worth taking precautions and having a sufficient understanding of how the stock market works, which companies to invest in and what kind of investing strategy one would like to follow. A good-to-know piece of information is that when you withdraw your profits from your equity savings account, you will have a tax rate of 30% for capital income less than €30000 and 34% for more than €30000.

Resources for learning to save and invest: apps and websites

To successfully save and invest, smartly managing your daily-expenses is the first step to get there. Thanks to the advanced development of technology, nowadays there are many useful apps that help you take good care of your expenses with little efforts. Most Finnish banks have their own apps that help you get an overview of your spending such as Nordea Wallet, Aktia Wallet, Danske app, PIVO by OP… There are other apps that do the same thing, for example Spiir (which has integrations with most Finnish banks) or Money Lover (an app developed by a Vietnamese team). The good old Excel sheets could also be an excellent choice for your expenses management. 

If you want to learn more about investing, the Internet is full of resources that can help you achieve your goals, especially when it comes to stock investing. Investopedia is a good starting point. Bloomberg or Crunchbase provide different breakdowns to understand trajectories of different companies. Yahoo Finance is a free alternative to Bloomberg, but its content is not as deep and rich. If you are interested in technology, follow TechCrunch and Gartner. If you just want to follow news about the economy in general, you can check out The Economist or CNBC. Other useful resources include The Motley Fool, Atom, MorningStar…

Hopefully this article has stirred up your interest in different investment alternatives in Finland. See the record of our event about Personal Finance 101 – How to save and invest in Finland to get even more interesting insights.

Disclaimer: The information provided in this article is for educational purposes only and should not be interpreted as financial advice. VPF disclaims responsibility and legal liability (for both authorized and unauthorized users) for any loss, harm, or damage, however caused, resulting from accessing any section of this website. Please consult your financial advisor before making any finance-related decisions.