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Investment ABC

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Financial instruments and related risks

Each investor is willing to maximise the returns on investment. However, there is always a risk that the overall return on investment may be negative, which means that the result of the investment in such a case would be a loss.

SEB in its investment offering includes financial instruments that are divided into five risk categories.   

Financial instruments are classified according to their type, complexity and investment risk. Very low risk financial instruments tend to have a fairly simple structure, and the risk they involve is the lowest. Whereas very high risk financial instruments tend to have a more complex structure and involve the highest risk.

Equities

An equity (also called a share, stock) is a security that represents a proportional share in the equity capital of a company and provides its owner – the shareholder – with certain rights. There are two main types of equities: common stock and preffered stock.

Bonds

Bonds are debt instruments with which an investor loans money to an entity for a defined period at a floating or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities.

Investment funds

An investment fund is a pool of assets established for collective investment and generally with no maturity. An investment fund usually has numerous investors and the fund is managed by a management company. When investing in a fund, your assets are usually placed into many different asset classes, such as equities, bonds or alternative asset classes. It reduces the effect of a single investment in the asset pool.

Exchange traded products

An exchange-traded fund (ETF) is similar to an investment fund because it is a pool of funds provided by investors which are used for investment into underlying assets, but unlike a regular investment fund ETFs are traded on the stock exchange similarly to equities. An exchange-traded commodity (ETC) is similar to an ETF, but the underlying assets usually consist of commodities like metals, energy, and livestock. Exchange-traded notes (ETNs) are types of unsecured debt securities traded on exchange.

Derivatives

Derivative instruments, such as options, forwards, futures, etc., is a contract between two or more parties to buy or sell underlying assets including equities, bonds, commodities, currencies, price indexes etc. Derivative contract may or may not include delivery of the underlying asset.

Investment account


To simplify taxation of income received from investments, we suggest using an investment account instead of your regular current account.

Advantages of the investment account:

  • Separate funds for investing from your daily expenses
  • Conveniently review transactions with various financial instruments
  • Less often and more convenient taxation process for investment income.

Personal Income Tax


The capital gains resulting from investments are subject to the Personal Income Tax. If the total capital gains are greater than EUR 1,000, capital gains must be reported once a quarter. However, if the total gain from transactions in securities does not exceed 1,000 EUR, the capital tax return must be submitted once a year.

When using the investment account, you have to report and pay capital gains only when the withdrawals from the investment account exceed your contributions made to it.

The responsibility for reporting the income and tax payment rests with the investor

Learn more

We invite you to learn more about the Personal Income Tax from capital gains and the submission of annual tax return on the webpage of State Revenue Service.

This material contains the information about AS "SEB banka" investment services or ancillary services. Investment products produce a return linked to risk. Their value may fall as well as rise, and historic results and/or returns are not reliable indicators to expect future result and/or returns and are no guarantee of future result and/or returns; Your invested capital isn't guaranteed and in certain cases you may lose the invested sum. Where either funds or you invest in securities denominated in a foreign currency, changes in exchange rates can impact the return. You alone are responsible for your investment decisions and you should always obtain detailed information before taking them. More information about SEB’s funds, investment services or ancillary services, is available on our website. The provision of investment recommendation to you is subject to the Advisory terms and conditions so please read them carefully and consult the staff of the bank if you need to.