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How to invest in stocks in Sweden?

How to invest in stocks in Sweden – that will be the topic of today’s article.

Nothing written here should be considered as legal or any other form of advice, but we have done our best to ensure it is accurate.

If you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

Many people are especially eager to know how a non-resident can invest into share markets such as Sweden

Introduction

The global financial system is more interconnected than ever before, resulting in a single global economy. Investors around the world can take advantage of this by buying stocks not only in their countries of residence, but, frankly, all over the world. 

This is made possible by online brokerage companies. Anyone with an internet connection can invest in the stock market both domestically and abroad, including by buying indices from the Swedish stock exchange. The Swedish Stock Exchange, formerly the Stockholm Stock Exchange, is now OMX Nordic Exchange Stockholm AB and belongs to the Scandinavian division of NASDAQ OMX.

Decide how much you want to invest, but remember, there are risks here, you are not 100% secured. It is important to look at the long term, realizing that your investments can be tied for a while.

Explore Swedish stock indices and decide which Stockholm Stock Exchange index you want to invest in. These include the OMX Nordic Mid Cap, OMX Stockholm 30 (OMXS30), OMX Stockholm PI (OMXSPI), and the SX-16 Stockholm Stock Exchange Index.

Choose the right online broker to complement your investment style. There are many online brokerage firms that offer online trading for a nominal fee. 

Most of them charge a monthly fee and an additional amounts for individual transactions. Some allow you to automatically make monthly investments for a certain number of trades for a fixed monthly fee. 

What you have to do is to open a brokerage account through what you will be allowed to buy Swedish shares directly. Some online brokers may require you to apply to buy foreign stocks. Euro Pacific allows you to trade foreign stocks directly. Link your brokerage account to a checking account, transfer the required funds and start investing. 

So this was a brief introduction of what we are going to talk about in details. Yes, investing is still a good option to insure you and your family with a good future and as you can guess we have chosen another stock index and we’ll talk about it. 

More about Stockholm Stock Exchange (STO)

The Stockholm Stock Exchange is known as the trading stock exchange for the Swedish securities market. The 30 most traded stocks in Sweden make up the main benchmark index of the Stockholm Stock Exchange – OMX Stockholm 30, weighted by market value.

The Stockholm Stock Exchange (STO) is the trading exchange for the Swedish securities market.

The 30 most traded stocks in Sweden make up the main benchmark index of the Stockholm Stock Exchange – OMX Stockholm 30, weighted by market value.

The Stockholm Stock Exchange (STO) was founded in 1863 in Stockholm, Sweden under the name Stockholm Stock Exchange.

The Stockholm Stock Exchange (STO) was founded in 1863 in Stockholm, Sweden under the name Stockholm Stock Exchange. In 1990, automatic trading was introduced on the exchange, and in 1993 it became a limited liability company.

In 1994, the Stockholm Stock Exchange became the first in Europe to allow remote members to trade. The exchange connected with the OM Group, also known as OMX, in 1998, the same year entered into NOREX’s alliance with the Copenhagen Stock Exchange. Ultimately, NOREX expanded to include stock exchanges in Oslo, Iceland, and regional markets sought to take advantage of large international investment opportunities through a common trading platform and regulatory framework.

OMX Nordic Exchange, which was launched in 2006, has established a common trading profile for listed Scandinavian companies. After that Nasdaq acquired OMX in 2007.

The primary benchmark index of the Stockholm Stock Exchange, weighted by market value OMX Stockholm 30, includes the 30 most traded stocks in Sweden.

International expansion of Nasdaq

By the time Nasdaq agreed to purchased OMX ABO in 2007. After the group had expanded to include the Stockholm Stock Exchange and exchanges in Helsinki, Copenhagen and Iceland. Through the merger, Nasdaq acquired an international presence in the Nordic and Baltic regions, as well as an integrated trading and clearing system for equities and derivatives widely used in the regions.

Nasdaq’s previous attempt to enter the international market was associated with the 2001 acquisition of the European Association of Securities Dealers (EASDAQ), which closed after the dot-com crash. The merger with OMX in 2007 followed a failed attempt to buy out the London Stock Exchange, making Nasdaq its first successful international listing. Since then, the group has continued to expand and now serves capital markets around the world.

International investment

Despite the growing availability of trading opportunities on foreign exchanges, many domestic investors find cross-border taxation and capital controls issues more complex and costly than their pursuit of international diversification. Instruments such as American Depositary Receipts (ADRs) and domestic funds that trade international stocks can provide a more convenient method of investing in international stocks.

ADRs allow investors to purchase blocks of foreign shares owned and issued by US banks. Essentially, ADRs act as a domestic instrument for foreign shares. Traders can buy and sell them in US dollars, receive dividends, and generally receive tax incentives equivalent to local stocks.

Mutual funds and exchange-traded funds (ETFs) offer similar flexibility and possibly more awareness as most investors are more familiar with these products than ADRs. Investors only need to look for mutual funds or ETFs designed for an international presence and buy their shares. These funds are usually targeted at countries or regions where there is additional opportunity for emerging markets or developed markets outside of the US and Canada.

Strong and growing Swedish economy

Sweden’s economy evolved from agriculture to industry in the 19th century. By the 1930s, the country had one of the highest living standards in the world. The country took a neutral stance during both world wars and benefited from the ensuing post-war boom, but saw slower growth in the 1970s and 1990s.

In the 1980s, Sweden began a bubble in the real estate and financial assets market, fueled by the rapid growth of lending. These problems resulted in the economic crisis of the 1990s, caused by the restructuring of the tax system. After the collapse, the country’s gross domestic product (GDP) fell by 5% between 1990 and 1993, and unemployment rose sharply2.

Ultimately, the government acquired distressed assets, and by the late 1990s, the crisis came to an end. As of 2019, the Swedish economy has grown and ranked eighth in the world in terms of competitiveness, with high GDP growth prospects and low inflation.3 4

Investing in Sweden with ETFs and ADRs

The easiest way to invest in Sweden is to buy an Exchange Traded Fund (ETF), which provides instant diversification of securities traded in the US. With about $ 390 million assets and 38 different shares (as of December 28, 2020), the iShares MSCI Sweden Index (NYSE: EWD) is the most popular option for investors looking for job opportunities in the country.

Some other ETFs with Swedish participation include:

  • FTSE Nordic 30 ETF (NYSE: GFX)
  • S&P International High Beta Development Portfolio (NYSE: IDHB)
  • SmallCap Europe Dividend Fund (NYSE: DFE)

Investors looking to gain more direct access to Swedish equities may want to consider American Depositary Receipts (ADRs), which are US-traded securities that mimic the movement of foreign stocks. Many of these ADRs are traded on major US stock exchanges such as the NYSE, while others are traded on over-the-counter exchanges such as the Pink Sheets.

Some popular Swedish ADRs include:

  • Ericsson (NASDAQ: ERIC)
  • AB Volvo (Pink sheets: VOLVY)
  • Atlas Copco AB (Pink sheets: ATLKY)

The benefits and risks of investing in Sweden

Sweden offers investors a strong modern capitalist economy that has experienced many economic downturns since the 1990s. But despite these strong numbers, there are many risks that international investors should be aware of before investing.

The benefits of investing in Sweden include:

  • Strong capitalist economy. Sweden has a highly competitive capitalist economy, home to many multinational corporations in a wide variety of industries.
  • Low risk of a debt crisis. Sweden’s debt-to-GDP ratio remains very low, with the government running a surplus from 2015 to 2019.

The risks of investing in Sweden include:

  • Labor unions. As of 2018, roughly 65% ​​of Sweden’s workforce was unionized, which could create problems for some of the popular ADR7s.
  • Extensive social benefits. Sweden is well known for its extensive welfare benefits, which are still in place but could pose problems due to slower GDP growth.

How to buy stocks in Sweden: step-by-step guide

Buying stocks is not as difficult as it sounds, but you will need to do a little research – and learn the jargon – before making your first investment.

To buy stocks, you first need a brokerage account, which can be opened in about 15 minutes. Then, when you add money to your account, you can follow these steps to find, select and invest in individual companies.

1. Choose an online broker.

The easiest way to buy shares is through an online stock broker. Once you open and fund your account, you can buy stocks through the broker’s website in minutes. Another option is to use a full-service stockbroker or buying stock directly from the company.

Opening an online brokerage account is as simple as opening a bank account: you fill out an account opening application, provide an identity document, and choose whether you want to fund your account by mailing a check or transferring funds via Internet.

2. Study the stocks you want to buy.

Once you’ve set up and funded your brokerage account, it’s time to dive into the stock picking business. A good place to start is researching companies you already know from your customer experience.

Don’t let the flood of data and real-time market fluctuations overwhelm you while you do your research. The goal should be simple: you are looking for companies that you want to co-own.

Once you’ve identified these companies, it’s time to do some research. Start with the company’s annual report – specifically, the annual management letter to shareholders. The letter will give you a general description of what is happening with the business and provide context for the numbers in the report.

After that, most of the information and analytical tools needed to evaluate the business will be available on your broker’s website, such as SEC documents, conference call transcripts, quarterly earnings reports, and breaking news. Most part of the online brokers also share some tutorials on how to use their tools and even basic seminars on how to pick stocks.

3. Decide how many shares to buy.

You shouldn’t feel any pressure to buy a certain number of stocks or fill your entire portfolio with stocks at once. Consider starting small – really small – buying just one share to get a feel for what it’s like to own individual stocks and if you have the fortitude to get through the tough moments with minimal sleep loss. You can strengthen your position over time as you master shareholder swagger.

New stock investors may also want to consider fractional stocks, a relatively new offering from online brokers that allows you to buy a fraction of the stock rather than a full fraction. This means you can get into the high-end stocks of companies like Google and Amazon, which are known for their four-figure share price, with a much lower investment.

Many brokerage companies also offer a tool to convert dollar amounts into stocks. This can be useful if you have a specific amount that you want to invest, say $ 500, and you want to know how many shares that amount can buy.

4. Optimize your stock portfolio.

We hope that your first stock purchase marks the beginning of a successful investing life. But if things get tricky, remember that every investor – even Warren Buffett – goes through tough times. The key to getting ahead in the long term is to maintain your perspective and focus on things you can control. There are no market fluctuations among them. But there are several things you can control.

As you become familiar with the process of buying stocks, take the time to delve deeper into other areas of the investment world. How will mutual funds play a role in your investment history? Have you created a retirement account in addition to a brokerage account, such as an IRA? Opening a brokerage account and buying stocks is a great first step, but this is actually just the beginning of your investment journey.

What risks you can face while investing in stock market?

Financial risks

Financial risks involve the inability of a company to meet its financial obligations. The level of financial risk of such a company is measured by the amount of its liabilities per share. A company with a high debt burden is likely to find itself in a situation where it will not be able to meet its long-term and short-term financial obligations. 

The greater the amount of debt in relation to equity, the higher the financial risk, since the company needs to make enough profit to service and pay off its liabilities. A high debt-to-equity ratio indicates the risk of default (credit risk). 

In addition to financial risks, business risks can also increase the risk of a default, as a decline in a company’s earnings forces rating agencies to downgrade the credit rating of its bonds. Rating agencies value companies’ securities based on the issuer’s ability to service and repay its debt obligations to bondholders. 

When the credit rating of bonds is downgraded, lenders can impose restrictions on the issuing company, reducing the provision of new loans and requiring a reduction in the amount of dividends paid. These restrictions may not create problems, but during periods of declining profits, they can be very critical for the company’s business.

Companies with little or no debt have little or no financial risk. Studying the company’s balance sheet allows you to establish the amount of liabilities in relation to the total value of its assets and the amount of equity capital. 

In the worst case, financial risks, like business risks, can lead a company to bankruptcy, which turns the securities it issues into worthless junk.

Business risks

Business risks are the uncertainty about the future sales and profits of a company, namely the risks of deterioration of these indicators in certain periods of time. In fact, some companies are more risky than others, and risky companies exhibit strong fluctuations in sales and profits. 

If the company’s sales and profits are significantly reduced, then its shares and bonds will fall in value, and the company will not be able to pay interest, capital and dividends. In the worst-case scenario, a decline in sales and profits can lead to bankruptcy of the company, which will turn its stocks and bonds into worthless securities. A company with stable sales has no difficulty in covering operating expenses.

Investors’ expectations of a company’s earnings affect the price of its shares and bonds. Shareholders expecting a decrease in the company’s profits will sell the shares, which could lead to a decrease in their market price. 

Likewise, if investors expect a company’s earnings to increase, they are willing to pay a higher price for its stock. If a company’s earnings are significantly reduced, rating agencies (such as Moody’s and Standard and Poor’s) may downgrade its credit rating, causing its bonds to decline in value.

Ordinary shares of automotive, construction, engineering companies, as well as companies producing durable goods are called cyclical. The profits of companies operating in these industries directly depend on the state of the economy. 

The business risks of such companies increase when changes in the economy lead to a decrease in consumer or corporate spending on their products. 

This was the case in 2001 and 2002, when the telecommunications equipment sector (which includes companies such as Lucent, Nortel Networks and Ciena) was experiencing a difficult time due to the economic downturn that caused telecommunications companies (AT&T, Sprint and WorldCom) have reduced the cost of purchasing new equipment.

By investing in common stocks of companies with stable earnings, instead of buying securities of cyclical companies, you can reduce your business risks. 

Persistent shares are issued by companies whose earnings are independent of changes in economic activity. These can be considered companies working in the electric power industry, as well as producing consumer goods.

FAQ

What are the best Swedish stocks for investment?

Of course, you want to invest in Swedish stocks with good results. Therefore, it is important to closely monitor how companies operate. This will help you choose the best Swedish stocks you can invest in.

You can even use technical or fundamental analysis for this. With this analysis, you can determine if a stock is undervalued or overvalued. It is especially advisable to buy undervalued stocks.

How to get the best results?

Of course you want to get the best out of your investment! With these simple tips, you will be able to achieve the best results when investing in Sweden.

It is important to properly study the economic situation in the country. Sweden is a thriving economy with a lot of wealthy people. Since this is a welfare state, social problems are often not all that bad. This could make investing in Sweden even more attractive.

More broadly, it is important to share risks. Don’t put all your money into one well-known Swedish stock: it is wiser to spread the risk through diversification. You can do this by investing in OMX Nordic 30, which tracks the 30 largest companies in the country.

Finally, it is important to only invest money that you might actually be missing out on. This way you will avoid panic and make the wrong investment decision.

Is there a risk with the exchange rate?

When investing in Swedish equities, it is important to pay attention to the so-called foreign exchange risk. If you are not using the Swedish krona yourself, you are buying shares in a different currency. If your currency is less than Swedish, you could lose money as a result.

In addition, with brokers, you should beware of any additional costs of exchanging money. Many brokers charge additional commissions when buying foreign currency stocks.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 260.9 million answers views on Quora.com and a widely sold book on Amazon

This website is not designed for American resident readers, or for people from any country where buying investments or distributing such information is illegal. This website is not a solicitation to invest, nor tax, legal, financial or investment advice. We only deal with investors who are expats or high-net-worth/self-certified  individuals, on a non-solicitation basis. Not for the retail market.

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