The market for passive investment funds has exploded over the past 10 years and as of 2019, more money was invested in passive funds than active funds. This is good news for us private investors: the choice and competition is high and costs have been driven down.
Unfortunately, Danish index funds are often significantly more expensive than their international counterparts when comparing the annual costs (APR) and the difference in ‘spread’ when buying/selling. Therefore, you will also find most international funds in EUR or USD below, as the costs come directly from your returns.
The wide range of index funds also means that choosing the right fund can be quite confusing. Just try searching for Vanguard or iShares on your trading platform or on Morningstar. There are typically hundreds of index funds in the search results and many of them are listed on different exchanges with different names.
To cut through the complexity, we’ve compiled a small list of our favorite index funds, ETFs, bond funds and real estate funds. The international funds below are typically the largest in the world in their respective fields and have some of the lowest costs in the market.
Passive and very large spread of shares: contains 3,900 shares in almost 50 countries incl. Both developed and emerging Markets. Covers more than 95% of the world's investable shares (measured on Market Cap).
Passive and large spread towards a large number of global companies in 23 developed countries (ie not emerging Markets). Covers 85% of the listed shares in each country.
Passive and very large spread of shares on a global scale. The goal is to achieve a return that corresponds to the global development of equities. The investment strategy is passive, which means that the investments are composed to follow the chosen index.
Passive and very large spread of shares on a global scale. The goal is to achieve a return that corresponds to the global development of equities. The investment strategy is passive, which means that the investments are composed to follow the chosen index.
Passive index of European shares, including Danish shares. In addition, there are screened for companies with poor ESG scores that are excluded from the fund (ie negative list).
Active investment fund that invests in 40 - 70 shares. Each company is selected on the basis of potential, risk and sustainability. Typically +50% in US companies. Combination of negative list (ie the exclusion of companies) and the option of companies with particularly sustainable business models. Swan label.
Note: High costs according to the many passive funds.
Contains primarily Danish government and mortgage bonds. The bonds have an average duration under three years. Short bonds are more price stable than bonds of longer duration. Good alternative to keeping cash.
NB: Nordnet does not offer long purchase of this security
Contains primarily Danish mortgage bonds and for a small number of Danish government bonds. Most of the bonds have the residual running time of between 1 and 5 years. Short bonds are more price stable than bonds of longer duration. Good alternative to keeping cash.
50% Nordea MTG Mortgage CM 5Y og 50% Nordea CM 7Y GOV
2024
Contains primarily Danish long and medium-long state, mortgage and corporate bonds. Provides a higher dividend than short bonds, but the rate is more sensitive to interest rate changes.
The fund is primarily medium -long US government bonds (about 2/3) and remaining in corporate bonds. Average residual running time between 6 and 7 years. Extremely low costs and one of the world's largest bond funds with over DKK 1000 billion invested.
Invests in real estate in the US via shares issuing so -called Real Estate Investment Trusts (Reits). Law -regulated companies that buy office buildings, housing, hotels and other forms of real estate. Allows for continuous yields and some growth in fundamental value. However, the course typically varies more a associations that invest in bonds.
Invests in Western European real estate companies and reits. UK is not included. The focus is on dividend payment and is a large spread across Europe.
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Facts: How index funds are taxed
If you want to buy index funds with free funds, i.e. money you have received as a salary, gift or similar, you should be aware that there is a difference in taxation between Danish and foreign index funds. If you buy via your pension account, it doesn’t matter, as the tax is paid annually regardless.
Foreign index funds are often taxed according to the stock principle. Here, the gain or loss for the income year is calculated as the difference between the value of the shares at the end of the income year and the beginning of the income year. Thus, gains are taxed or losses are deducted even if the shares are not sold and the gain or loss is not realized. In practice, this means that if your index increases by, for example, 10% during a calendar year, you need to find that money to pay your taxes. That is, without having sold anything in your portfolio.
This is in contrast to Danish index funds, which are taxed based on the realization principle. Here, gains and losses are included in your tax calculation in the income year in which the gain or loss is realized. I.e. the income year in which the sale takes place. If you keep your index fund for many years or even decades, you can defer your tax payment and thus earn compound interest throughout the period. This gives a significant advantage in the long term (+10 years).
NB: Always keep yourself updated on the tax website, as taxation is constantly changing.
The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.
Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk
