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 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.
- 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 prove ownership of a part of a company. This means that the shareholder becomes a co-owner of the company and, through their investment, helps the company grow, potentially receiving dividends and benefiting from any increase in the share value.
Bonds
Bonds are debt securities. This means that the investor lends money to an organization for a fixed period of time and, in return, receives interest on the loan.
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 money contributed by many investors. It is created to collectively invest in various financial instruments. An investment fund usually 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
An investment account helps to simplify tax reporting. Taxes will only need to be paid if you withdraw more money from the account than you have contributed.
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
Profit earned from investments is subject to Personal Income Tax.
- If your total capital gains are more than EUR 1,000 in a quarter, you must report to State Revenue Service every quarter.
- If your total capital gains from securities do not exceed EUR 1,000 per year, you only need to report to them once a year.
By using an investment account, tax is only paid when you withdraw more from the account than you have deposited. The responsibility for reporting the income and tax payment rests with the investor.
Information on Personal income tax (PDF)
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.
