13. Investing Strategies
Congratulations! You made it all the way through here. We hope that you achieved by this point financial stability and are ready to invest!
Denmark is an expensive country to invest as we've seen in 6. Taxes. Fortunately, there are some methods that you can use to reduce your taxes and other fees while investing to get most out of it. Here is what we recommend you do from here on in the following order.
1. Max out Aktiesparekonto
Aktiesparekonto is an accessible investing account taxed at only 17%. Hence, we recommend investing only with the Aktiesparekonto in the beginning up to the maximum contribution limit of 166.200 DKK (in 2025). This is the best move you can make early on due to the low taxes this account and provides.
Since Securities on an Aktiesparekonto are inventory taxed (Dk: Lagerprincippet) anyway, we can neglect the fact that ETFs are also inventory taxed. While we are at it, we can make most out of it by picking accumulating ETFs.
Recommended ETFs
These ETFs are excellent choices for low tax strategies like Aktiesparekonto.
| ETF name | Ticker | Tracking Index | ÅOP (Eng: TER) | Fund size (in billion $) | Currency | Gain in 2020 | Gain in 2021 | Gain in 2022 (Corona Year) | Gain in 2023 | Gain YTD | Gain 5Y | Gain in 3M | Gain in 1W |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| iShares Core S&P 500 UCITS ETF (Acc) | SXR8 | S&P 500 | 0,07% | 85,273 | USD | 14,16% | 29,99% | -8,48% | 19,09% | 10,39% | 99,33% | 2,07% | -0,63% |
| iShares Core MSCI World UCITS ETF USD (Acc) | EUNL | MSCI World Index | 0,20% | 74,301 | USD | 12,14% | 23,48% | -8,13% | 17,15% | 8,90% | 78,45% | 2,14% | -0,54% |
| iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc) | IS3N | MSCI Emerging Markets | 0,18% | 20,003 | USD | 14,44% | 0,15% | -9,28% | 5,51% | 2,83% | 21,55% | 1,58% | -3,30% |
| iShares MSCI ACWI UCITS ETF USD (Acc) | IUSQ | MSCI ACWI | 0,20% | 13,442 | USD | 11,86% | 20,21% | -8,30% | 15,73% | 8,29% | 69,49% | 2,16% | -0,77% |
| iShares Core MSCI Europe UCITS ETF EUR (Acc) | EUNK | MSCI Europe | 0,12% | 8,176 | EUR | 2,32% | 17,34% | -4,27% | 13,80% | 8,17% | 52,13% | 5,49% | 0,03% |
| Amundi MSCI World V UCITS ETF (Acc) | LCUW | MSCI World Index | 0,12% | 5,287 | USD | 12,23% | 23,32% | -8,34% | 17,03% | 8,85% | 77,42% | 2,02% | -0,63% |
Source: www.JustETF.com on 05.06.2024
These ETFs are all accumulating, follow any of the outlined low-risk indexes and have a high liquidity!
Why mainly "iShares" ETF?
iShares are ETFs provided by BlackRock, the biggest asset manager in the world, and have a big footprint in Europe. Moreover, many (not all) iShares ETFs are registered in Ireland, where ETFs dividends are taxed at 0%. However, you should not focus solely on iShares ETFs. It's a coincidence that this selection mainly has index-tracking ETFs from iShares.
EUNL vs LCUW?
When searching online, most sources recommend EUNL with 0,20% yearly management fee, eventough LCUW only has 0,12%. Why is that? EUNL from iShares has been around since 2009 with a substantial fund size of 74 billion USD and is registered in Ireland with a 0% dividend taxation, meaning you'll be entirely taxed in Denmark. Comparetively, LCUW from Amundi exists only since 2019, has a smaller fund size of only 5 billion USD and is registered in Luxembourg with a 15% dividend taxation, meaning you'll be 15% taxed in Luxembourg and the rest of the 27% (or more) in Denmark. EUNL has been popular due to its age and liquidity. However, LCUW might be a better alternative due to it's 0,08% lower yearly management fee.
Shouldn't EUNL and LCUW have the same yearly gains since both track the same index?
Yes, but no. You see, fund managers have the option to mirror the index exactly 1-to-1, known as Full Replication. However, replicating an index can sometimes be expensive. In such cases, fund managers may choose to partially follow the index, known as Optimized Sampling. EUNL is an Optimized Sampling ETF, while LCUW is a Full Replication ETF. This difference in strategy leads to the minor variation in their gains. Neither approach is inherently better; the choice depends on the specific index, market conditions, and the goals of the ETF provider.
How to Choose the right ETF for Your Aktiesparekonto?
Still too many choices? We got you covered!
From the above recommendations table, iShares Core S&P 500 UCITS ETF (Acc) (SXR8) has outperformed every other ETF and has one of the lowest ÅOP/TER. However, can you rely on historical data to say that the USA will continue to outperform?
Some reliable sources like Morningstar and the International Monetary Fund (IMF) forecast that Emerging Markets will outperform the USA or World (developed markets index) in the coming years. Here may be some reasons for it:
- Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung (South Korea) are leaders in the semiconductor industry, critical for global technology supply chains.
- India's GDP growth rate was around 7%, significantly higher than the USA growth rate of about 2% in 2022.
- Brazil's index tracker (MSCI Brazil) massively outperformed the S&P 500 in 2022 by 20%.
But these are only forecasts. Anything can happen at any time. Political events, wars, or natural disasters could affect them.
The iShares MSCI ACWI UCITS ETF USD (Acc) (IUSQ) is the most neutral choice and the one we recommend. The MSCI ACWI consists of 62% USA-based companies, which are primarily included in the S&P 500, so you're not missing out on the "S&P 500 performance".
Picking any other ETF is actually an active guess that certain parts of the world market will perform better than others. Regardless of which one you pick, looking only at the historical data, if you had invested 5 years ago, you would have made at least a 30% profit on your investment and not any loss.
2. Aldersopsparing
Denmark has six types of pension schemes:
- ATP: Short for "Arbejdsmarkedets Tillægspension", this is a mandatory pension supplement for almost all workers in Denmark. You automatically contribute to ATP via your personal income taxes, and you can see these contributions on your pay slip. Your pension is automatically paid to your NemKonto when you reach retirement age.
- Folkepension: This is the public pension everyone gets. It includes a basic amount that's the same for everyone and a supplement that varies based on whether you're married, living with a partner, or single.
- Kapitalpension: New "Kapitalpension" accounts cannot be created anymore, but if you already have one, you can choose to receive the entire savings at once or in parts.
- Livsvarig livrente: This is a private pension savings plan that you pay into yourself. It provides monthly payments for as long as you live. It's also known as a lifetime pension.
- Ratepension: This is the most common type of pension plan, typically used for workplace pensions. You and possibly your employer contribute a monthly percentage of your salary to it. The savings are paid out in fixed monthly installments over 10-30 years when you retire.
- Aldersopsparing: This is the replacement for "Kapitalpension". You can choose to receive the entire savings at once or in parts.
The thing with Ratepension and Aldersopsparing are:
- Contributions up to 63.100 DKK to Ratepension are tax-deductible (as of 2024), but when you retire, the monthly payments are taxed as personal income.
- Contributions to Aldersopsparing are not tax-deductible; however, you do not pay taxes on the payments when you retire.
- Aldersopsparing has a max contribution of 9.100 DKK per year, where this limitation does not exist for Ratepension (but only contributions up to 63.100 DKK are tax-deductible).
- Contributions from both are invested to keep up with inflation
- Investments are only taxed at 15.3% following the inventory principle (DK: Lagerprincip) taxation
- If you pass away before reaching retirement age, your family will receive the payments
Do you see where we're getting at? This is another way to lower your investment taxes in Denmark. It is one of the best forms of long-term savings, even though you can't access the money until you retire, which is usually around age 68 in Denmark. We recommend setting up an Aldersopsparing account with Nordnet and try to contribute the maximum amount each year (up to 9.100 DKK) by investing in any ETF from the recommended ETF list, like the iShares MSCI ACWI UCITS ETF USD (Acc) (IUSQ) and enjoy the tax benefits!
Note
SAXO Bank does not offer Aldersopsparing accounts. Many banks offer Aldersopsparing accounts but charge custody fees. Hence, why we recommend Nordnet in this case
3. Månedsopsparing
Got some money left to spare? You must be doing well!
The next step is to sign up for a Månedsopsparing (Eng: Monthly Savings) service with SAXO or Nordnet. This isn’t a new account that you create, but a free service where you choose an amount to be invested each month in one or more ETFs, Danish Investment Funds or Mutual Funds of your choice.
Not all ETFs or Mutual Funds are available for a Månedsopsparing and Stocks are entirely excluded
There are two advantages to this:
- You spread your investments periodically taking advantage of the Dollar-Cost-Averaging strategy
- You don't pay any brokerage fee when investing with a Månedsopsparing. This is specifically interesting because it nullifies the common belief that "Investing only makes sense with a large amount of money for the investing fees to be comparably minimal."
Now, for the first time, ETFs are not great choices. You see, an accumulating ETF is great, but inventory taxes (Dk: Lagerprincippet) can quickly eat up a portion of your profits. That's why we recommend them for low-tax strategies with like Aktiesparekonto and Aldersopsparing which are inventory taxed anyway. Månedsopsparing doesn’t offer tax benefits; it only saves you from paying brokerage fees. Thus, you need to be more careful.
From now on, your choice determines if your securities are taxed at a minimum of 27% (Aktieindkomst) or 37% (Kapitalindkomst) and whether they are inventory (Lagerprincippet) or realized (Realisationsprincippet) taxed.
That is where we finally take advantage of the Danish Investment Funds! They are taxed as Aktieindkomst, and if they pay dividends, they are only taxed when realized. Great!
Danish Investment Funds Picks for Normal Investing Accounts
| ETF Name | Ticker | Tracking index | ÅOP (Eng: TER) | Dividends (2023) | Gain in 2020 | Gain in 2021 | Gain in 2022 (Corona Year) | Gain in 2023 | Gain 5Y |
|---|---|---|---|---|---|---|---|---|---|
| Danske Invest Global Indeks | DKIGI | MSCI World Index | 0,40% | ≈ 6,4 DKK per share, paid yearly | 6,32% | 30,87% | -13,58% | 19,85% | 48,71% |
| Sparinvest INDEX Emerging Markets | SPIEMIKL | MSCI Emerging Markets | 0,50% | ≈ 3,4 DKK per share, paid yearly | 6,09% | 5,05% | -12,24% | 7,32% | 12,82% |
| Sparinvest INDEX Globale Aktier | SPVIGAKL | MSCI ACWI Index | 0,50% | ≈ 3 DKK per share, paid yearly | 7,25% | 25,93% | -13,14% | 17,58% | 49,43% |
| Danske Invest USA Indeks, klasse DKK d | DKIUSAIKLDKKD | USA Stocks, can be used as an alternative to S&P500 | 0,35% | ≈ 1,5 DKK per share, paid yearly | -1,64 | 35,84 | -15,22 | 22,67 | 44,96% |
Source: www.nordnet.dk & www.morningstar.dk on 19. June 2024
Looking at the above table, the Danske Inv Global Indeks, kl DKK d (DKIGI) and Sparindex INDEX Globale Aktier KL (SPVIGAKL) are great choices since both follow a diversified MSCI index, had great returns and pay good dividends.
Thus, we would recommend investing a monthly amount into the Danske Inv Global Indeks, kl DKK d (DKIGI) or Sparindex INDEX Globale Aktier KL (SPVIGAKL) Danish Investment Fund with the Månedsopsparing service.
Both Danish Investment Funds are great alternatives to ETFs outside Aktiesparekonto and Aldersopsparing.
How to create a Månedsopsparing:
- Sign up for a Månedsopsparing with either SAXO or Nordnet.
- Choose your ETF(s), Danish Investment Fund(s) or Mutual Fund(s) and the amount to invest.
- Set up an automatic monthly deposit or a one-off deposit from your regular bank account to your SAXO or Nordnet account, from which the Månedsopsparing will collect the funds.
You can always adjust your investment amount and the composition of your investments.
Danish Investment Funds from "Danish Inv" are not available on SAXO's månedsopsparing.
4. Stocks
Finally, it's time to talk about the big money and make quick large profits with Stock trading! Are you ready?!
No, you're probably not. We're not trying to gate keep Stocks, but very few people can consistently achieve returns higher than those of Funds. This involves constant buying and selling, readjusting, and staying up-to-date with the progress of the company and markets.
This is close to a part-time or full-time job, essentially day trading. Some people hope to make a quick profit and become rich with Stock trading or believe they can create their own portfolio that will outperform the recommended ETFs and Danish Funds. However, remember: with greater profit comes greater risk, and if things go wrong, you can lose a lot of money, like this guy. Unless you truly believe in the growth of a company, don't invest in Stocks directly. The more you invest in individual stocks, the more you're essentially gambling—like walking into a casino and putting everything on red.
Time in the market (long-term holding of funds) beats timing the market (day trading)!