Saving and investment glossary

What is an equity savings account or book-entry account? What does diversification mean? Do you know your way around stocks and dividends? This glossary explains the key terms related to investing.

Basic terminology

 

Diversification means investing your money in several places. This reduces your investment risk. Diversification is a good way of protecting yourself against market downturns. The idea is that different investments reach their highest and lowest values at different moments. This means that positive performance in one investment can outweigh the negative performance of another. It’s possible to diversify your investments across financial instruments, industries, geographical areas and time.

Regular stock investments or monthly investments in a fund or ETF are great ways of diversifying your investments across time.

Read more about monthly investment

See our current investment tips

Compound interest or ‘interest on interest’ means that you earn interest on your original money saved or invested, and on the interest you keep earning. The sooner you start saving or investing, the more you will benefit from the effect of compound interest.

For example, if you save 100 euros per month on an account with a 0% interest rate, you will end up with 24,000 euros in 20 years.

In contrast, if you invest 100 euros per month in a fund with a 7% return, you could end up with 51,000 euros after 20 years, thanks to the compound interest.

Systematic or regular investment is an easy way to make your money grow. You can get started with just 10 euros a month, but a higher sum can lead to higher returns.

With automatic monthly investments in a fund, investing is easy. The fund ensures that your investments are diversified, because even a small investment amount means an investment in several areas. By investing monthly, you can ensure diversification of your investments across time.

You can start monthly investment easily on OP-mobile (or in the op.fi service in Finnish or Swedish). You can edit, pause or stop your automatic monthly investments at any time.

Read how you can start monthly investment

Risk means that the value of investments can rise and fall. An investor can lose part or even all the money they have invested, or never receive the expected return. Investment always involves a risk.

Risk and expected return go hand in hand. The higher the risk, the higher the potential return may be. When considering where to invest, you should always think about the level of risk you can handle (your risk tolerance).

A unit-linked investment portfolio, which means that it includes several investments and an insurance policy. The product’s return is based on the value change of the investments in the basket. An investment basket suits investors who don’t want to choose where to invest or think about how to diversify their investments to withstand changing market conditions. The recommended investment horizon for an investment basket is at least 10 years.

A holistic plan for how you will invest your money. The plan will help you build your wealth in a systematic way and, ideally, is made when you’re about to start investing. It’s a good idea to make your investment plan in writing, because it will be easier to follow it. Things to consider in your plan:

  • Your investor profile
  • Your investment goals
  • Your risk tolerance: the level of risk you can handle
  • Your investment horizon: how long do you expect to hold your investments
  • Your budget
  • Allocation: how to spread your money between various asset classes (such as funds and stocks)
  • Costs of saving and investing
  • Selecting your investments (which stocks, funds, bonds)
  • Resources: how much time you can put into investing

Investing in funds

 

A simplified, two-page brochure required on all funds in the EU. A KIID includes all key facts about a particular fund, such as what the fund invests in, its special characteristics, charges for the fund, its past performance and the risk level.

On our website, you can find a KIID on each fund’s page, under Brochure.

See our funds

 

An investment fund that can deviate from the investment restrictions laid out in the Finnish Act on Common Funds. A special common fund can only include a few investments, while a common fund must have at least 16 different investments.

With us, you can invest in these special common funds:

OP-Finland Micro Cap

OP-Nordic Micro Cap

OP-EMD Local Currency

OP-Rental Yield

OP-Forest Owner

OP-Public Services Real Estate

OP-Alternative Portfolio

R2 Crystal

OP-Private Fixed Income Strategy

OP-Private Strategy 25 Fund

OP-Private Strategy 50 Fund

OP-Private Strategy 75 Fund

OP-Private Equity Strategy

An annual charge paid to an investment management company for managing a fund. The management fee varies by fund. It depends, for example, on the markets in which the fund invests and the workload required by portfolio management and markets analysis.

The management fee is a percentage per year, calculated each day based on the fund’s net asset value (NAV).

See our Fund Charges and Fees

 

A fund that tracks a certain index. An index fund contains the same shares in the same proportions as the reference index.
Index funds are passive funds. Their management costs are usually lower than those of actively managed funds. That’s why index funds are a very cost effective way of fund investing.

Read more about index funds

See our index funds


A fund that invests in fixed income products or various bonds. Fixed income funds are a good alternative to direct fixed income investments. You can even invest small amounts, like 10 euros, in fixed income funds. With small investments in a fixed income fund, you can benefit from the performance of several investments. This diversification means that you have better chances of a higher return. Fixed income investments tend to provide better returns when stock prices are falling, and vice versa.

Our range includes funds investing in short or long-term fixed income securities or in emerging fixed income markets.

See all our fixed income funds

Read more about short-term fixed income funds

Selling fund units you hold can also be called ‘redeeming your units’. Generally you can sell fund units on any business day on OP-mobile or via the op.fi service (login in Finnish or Swedish). However, some funds may have rules that allow selling the fund’s units on specific dates only. This is typical for special common funds that invest in forest or residential units. Cashing such investments would then be slower than selling stocks.

Selling fund units is often subject to a charge called a redemption fee.

A fee charged by the fund management company when you sell (‘redeem’) fund units. Also called the exit fee. Not all funds charge redemption fees.

Check redemption fees in Fund Charges and Fees

Buying fund units can also be called ‘subscribing for units’.
 A fee charged by the fund management company when you buy (‘subscribe for’) fund units. Subscription fees are not charged by all funds.

A fund that mainly invests its assets in stocks. An equity fund is a good long-term investment. It can be an alternative to, or complement, direct stock investments. Equity funds invest in several companies, which lowers the risk of investing.

See our equity funds

A company managing a mutual fund. The company combines money invested by private persons and institutions and invests it in financial instruments which make up the fund. The fund management company does not own the funds’ assets, but they are owned by the investors (unitholders). In Finland, a fund management company needs a licence to do business. This can be obtained from the Finnish Financial Supervisory Authority, which also supervises fund management companies’ operations.

OP’s funds are managed by OP Fund Management Company Ltd.

See OP Fund Management Company's annual reports

A mutual fund, investment fund, or simply ‘fund’, is a portfolio of securities, divided into fund units which are equal in size. Investing in a fund means that you buy (‘subscribe for’) fund units. You can also invest regularly in a fund by starting monthly investment.

OP’s funds are managed by OP Fund Management Company, which combines money invested by many customers to invest in several financial instruments such as stocks, commodities and fixed-income instruments. The fund consists of the financial instruments held by the fund. Our funds are managed by our professional portfolio managers.

See our funds

Read more about monthly investment

An index to which an investment product’s performance is compared. Most of our funds have a benchmark index. They are specified in the Key Investor Information Document (KIID) available on each fund’s page under Brochure. Actively managed funds generally seek to perform better than the benchmark index. Passively managed funds, in turn, seek to perform similarly to it.

An example of a benchmark index: OMX Helsinki Cap.

See all our funds

A fund that invests both in stocks and fixed income instruments, such as bonds. The proportions (weights) of stocks and fixed income instruments can be changed depending on market conditions. With balanced funds, you can easily diversify your investments on the stock and fixed income markets.

See our balanced funds

Investing in stocks or other instruments

 

A book-entry account is an account for managing electronic securities. Examples of electronic securities are shares, bonds, exchange traded fund (ETF) shares, options, warrants or subscription rights. Securities in the book-entry account are called book-entries. The book-entry account always has a cash account linked to it, for managing the payment transactions related to the book-entry account.

Read more about a book-entry account

ETF is short for Exchange Traded Fund.  ETFs are similar to regular funds, but are listed on a stock exchange and you can buy and sell their units just like stocks.

Most ETFs are passively managed and aim to follow the performance of an index. That’s why investing in ETFs is very cost effective. With ETFs, you can invest in many countries and industries that are rarely available via other investment products.

Read more about ETFs and ETF investing

ETC is short for Exchange Traded Commodity. ETCs are the easiest way to invest in single commodities or raw materials. Most ETCs are based on the price performance of an index or index basket tracking a certain commodity. With ETCs, you can invest in grain, coffee, oil, energy, industrial metals, gold, foreign currencies and more.

ETPs, or Exchange Traded Products, is a general term for all products which are listed on a stock exchange and track an underlying investment. ETPs are traded continuously on stock exchanges during trading hours. Prices of ETPs change along with the prices of their underlying investments. Examples of underlying investments: a basket of securities containing stocks or bonds, a single commodity or a foreign currency.

Options granted by companies to their management and other employees as part of the company's incentive system. A holder of employee stock options can either buy shares with them or sell the options. Stock options are generally listed when their subscription period begins.

One type of structured product. Depending on the country, it can also be called a linker, real return bond or Treasury Inflation-Protected Security (TIPS). Typically, an index-linked bond has a term to maturity of 5 years and the minimum investment is 1,000 euros. You can usually sell it at market price anytime during the bond’s term. If you invest in a Neutral index-linked bond, instead of making a direct stock investment, you will see the difference if the stock markets fall during the investment term: on the bond’s maturity date you will get back at least the amount you invested. Like all bonds, however, an index-linked bond carries the risk that its issuer becomes insolvent and can’t meet its obligations to you.

Bonds are investment instruments issued by large companies or public sector entities. Bonds tend to have low risks. That’s why the expected return is modest, too. The interest rate (or coupon, coupon rate, coupon yield) paid on a bond may be fixed, variable or can be based on the performance of a certain investment.
An underlying security, asset or commodity such as gold, oil or particular stocks, bonds or stock market indexes. It can also be called ‘an underlying’. The value of each Exchange Traded Product (ETP) is linked to the value of an underlying. This means that the price of an ETP varies based on the price of the underlying: if the price of gold rises, the prices of ETPs linked to gold will also rise.

The amount of money (principal) you invest in an index-linked bond or an investment bond product. Some bond products guarantee payback of 100% of the initial capital on the bond’s maturity date. Others involve the risk of the bond’s issuer becoming insolvent and loss of the initial capital.

Read more about unit-linked insurance

Obligaatio (engl. bond) on arvopaperi, valtion, pankin tai muun tahon velkasitoumus, jonka obligaation antaja lunastaa takaisin tietyssä järjestyksessä. Obligaatio on siis obligaatiolainan osavelkakirja. Obligaation asettaja maksaa sille korkoa. Obligaatio voi olla kiinteäkorkoinen, vaihtuvakorkoinen, voitto-osuus- tai säästöobligaatio.

A share means part ownership in a limited liability company, in this case in a company listed in a stock exchange. The three terms ‘stocks’, ‘shares’ and ‘equities’ are all common in English. When you buy shares, you become a shareholder of the company.

The Limited Liability Companies Act specifies the rights of shareholders and matters related to governance and decision-making. Shares owned in a company give their holder an ownership right to a proportion of the company equal to the shares owned. Owning shares gives their holder the right to speak and vote in the general meeting. The general meeting is a limited liability company’s highest decision-making body which decides on the company’s dividends. If the company decides to distribute dividends, you as a shareholder will have the right to be paid dividend. You also have the right to buy additional shares in any future share issue of the company (pre-emptive rights).

History shows that investing in shares is an excellent way of making your money grow. It’s a good option for you if you are seeking a high return and can handle changes in share prices (also called market fluctuations or volatility). Your return will come from the possible rise in your shares’ value plus any dividends you may get. You can invest in shares via a book-entry account or equity savings account.

Read about how to start stock investing

An account for investing in listed shares of Finnish companies that has tax benefits: you pay no taxes when you sell shares or are paid dividends within the account. This means that your investments benefit from the compound interest effect and you have the best chance of good returns. You will eventually have to pay taxes on the returns from your equity savings account, but only when you withdraw money from it. Because you only pay taxes when withdrawing money, your investments and returns can grow and earn compound interest while in the account.

You can deposit a maximum of 50,000 euros into your equity savings account, at one time or in instalments. You can only transfer money to your equity savings account, not any shares you already own.

Read more about the equity savings account

 

A proportion of a limited liability company’s profits. By paying out dividends, the company distributes some of its profits to its shareholders. In general, the date of the general meeting is the day that determines whether shareholders have the right to get dividends. If you own or buy the company’s shares on the day of its general meeting, you are entitled to dividends. 

Premium has many meanings. When a company makes a bid to buy a listed company, the buyer company is generally ready to pay a higher price than the listed company’s market value. The amount above the market price is called a premium.

If an investment fund’s units ‘trade on a premium’, this means that the value of fund units is now higher than the fund’s net asset value (NAV). Here, the amount above the NAV is called the premium. In this case, a buyer pays more for the units than the fund’s assets are worth. The premium is generally expressed as a percentage.

 A feature in an investment product, also called ‘capital protection’. On the maturity date of a capital-guaranteed product, the investor will be paid back at least the initial capital they invested.

Structured investment products whose maturity can be specified or open (open ended). Most certificates listed on Nasdaq Helsinki are open ended, which means that their validity is not limited. As investment products, open ended certificates are comparable with ETFs and ETCs.

A capital-guaranteed investment solution that offers good yield potential with limited risk. An investment bond targets a higher yield than a savings bond.  Capital guarantee means that, on the maturity date, the investor will be paid back at least the initial capital they invested. Investment bonds are a safer alternative than stock investments and have better yield potential than regular bonds. An investment bond's typical term to maturity is 2–5 years. Investment bonds do not have subscription fees.

A capital-guaranteed investment solution that seeks reasonable yield potential. By investing in several savings bonds, you can easily diversify your investments because the themes of our savings bonds vary. The bond’s yield depends on the performance of the underlying investment during the bond’s term to maturity. The underlying investments can include stocks, currencies or commodities.

Read more about our savings bonds

A derivative and security issued by a bank or a brokerage firm. Warrants are high risk. With warrants, an investor can access the markets with less capital than by investing directly in the underlying asset.

Warrants include a leverage effect: the investor can gain a higher return than by investing the same amount in the underlying asset. High return potential is coupled with high risk: the warrant may lose all of its value. In such a case, the investor will lose the sum they invested.

A bond issued by a company. By issuing a corporate bond, the company seeks to raise money from investors. A corporate bond’s face value (or par value, nominal value) is paid back to the investor on the maturity date. The investor will get interest (coupon) payments at regular intervals. In addition to buying a bond during its first issue, investors can buy and sell bonds on the secondary market. Funds focusing on corporate bonds often have ‘corporate bond’ in their names.

 

 

Saving through insurance

 

A three-page document required on packaged retail investment or insurance products. A KID describes the key features of an investment product and the related risks and costs. Read a KID to find out whether the product in question can cause you losses and how complex the product is. A KID is required for structured investment products and for investment-related insurance products (unit-linked insurance or ‘saving through insurance’).

The party to whom an insurance benefit is paid. In an insurance policy’s beneficiary clause, the policyholder defines who the policy’s beneficiaries are. Examples of beneficiaries: next of kin, children or a named person. When the insurance policy ends, benefit is paid as specified in the valid beneficiary clause – even if the policyholder had a valid will or prenuptial agreement. If the beneficiary is a death estate, the benefit becomes part of the estate’s assets. The benefit amount is then divided between legal heirs or beneficiaries under the insured person’s will.

In endowment insurance, the policyholder defines the beneficiaries separately for the death benefit and for the insurance assets (endowment lump sum). The insurance assets beneficiary will receive the lump sum on the agreed date when the policy matures. By contrast, the death benefit will be paid to its beneficiary in the event of the insured person’s death.

If you are the policyholder, please remember to keep the beneficiary clause updated. You can change your beneficiary clause anytime by informing your insurance company about it in writing.

Read more about life insurance beneficiaries

Read more about taxation of life insurance

Read more about taxation of endowment insurance

Read more about investing or saving through insurance

Compensation paid to the beneficiaries named by the holder of an insurance policy, based on the policy’s death cover. In term life insurance, the death benefit is based on the agreed sum insured. In endowment insurance and voluntary pension insurance, the death benefit is based on the value of the insurance assets. Other insurance policies, such as medical expenses insurance, may also include death cover.

Read how to apply for death benefit under life insurance

Read more about life insurance beneficiaries

Read more about taxation of life insurance

Read more about taxation of endowment insurance

The person who is covered by an insurance policy. Also called ‘the insured person’. In endowment insurance policies, payment of the lump sum from the policy depends on whether or not the insured person has died. If the insured is still alive when the insurance period expires, the value of the insurance assets will be paid out from the policy. If the insured dies during the insurance period, the beneficiaries will be paid a death benefit from the policy. For an endowment policy taken out by an individual, the insured is often the same as the policyholder.
The person who owns the insurance contract and can change it. In the case of endowment insurance policies, the policyholder can decide on who the beneficiaries are, the investments to be linked to the policy and any automated investment plan.


Saving through insurance is a form of long-term saving and investing that combines saving and life insurance. Within unit-linked insurance, you can split your savings between several investment products, such as funds, bonds and investment baskets. Return accrued on the insurance will not be taxed when switching between investments but it will generate additional return during the entire saving period. When the insured person dies, the assets accrued will be paid as death benefit to the beneficiaries chosen by the policyholder.

Read more about saving through insurance.