Investment funds – 30 years of easy profits

Finnish families typically rely on investment funds as a savings instrument to enable diversified and easy investing. This is how Matias Möttölä, Associate Director at the ratings company Morningstar, sums up the investments of Finns.

​The first Finnish investment fund was established thirty years ago. At first, fund investing was a small-scale activity with few investors and slim profits. It wasn’t until the turn of the twenty-first century that Nokia and other IT companies caused enough upward trend to make fund investing a profitable venture. Around the same time, Finland adopted the euro, making diversified interest investments easier thanks to a common currency.

”Fund investing began to grow in popularity then, and the growth has continued steadily ever since despite the eurozone crisis and other financial crises”, explains Möttölä.
Möttölä also rejects the claim of investment funds offering smaller profits than equity investments or index funds.

A hundred a month

“In Finland, equity investments often carry a high risk because the stock exchange is small and portfolios are not very diversified. Investment funds, however, are not only easy, but also cheap to trade in. Even small sums, like a hundred euros a month, work well in investment funds.”

The ease and controlled risk of fund investing has encouraged ordinary people to invest, and the fund investing options offered at banks have turned regular bank customers into investors. By investing in funds, people can enjoy diversification and profits without needing serious capital or a profound expertise in the investment market.

According to Finance Finland’s investment fund survey, 31% of Finns have invested in a fund. In recent years, fund assets have repeatedly broken records, and by the end of September 2017, the capital of Finnish investment funds was already over 114 billion euros.

“Investment funds are also an important part of the financial industry: people can outsource their pension funds or the funds of an organisation or foundation to them”, reminds Möttölä.

The first Finnish investment fund Presta was established on 15 October 1987 by Postipankki and Sampo, and the fund still operates in Danske Bank under the name Danske Invest Finnish Equity. Several other investment funds were set up around the same time, including Sijoitusrahasto-SP, which now operates in Aktia under the name Aktia Secura, and four funds by Union Bank of Finland, some of which still operate in Nordea under the name Nordea Nordic.

According to Möttölä, fund management companies must remember to put the investor – their customer – first.

“In the long run, companies also benefit when their customers turn sensible profits. Despite the low interest level, companies must keep their fees reasonable.”

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