If you’ve decided to invest in the financial markets, you probably know how important it is to diversify your investment portfolio, so that you can mitigate your risk. You should therefore be sure to create an optimal asset allocation according to your trader profile, financial goals, risk appetite, and time horizon, with investments in different asset classes, activity sectors, currencies, and countries, as well as financial products. Learn the best tips to invest in Scandinavian financial markets.
One of the best ways to easily diversify your portfolio and make money from a whole economy is to trade cash indices, which are financial products that track the performance of a selected basket of shares that represent the economy of a country or a specific industry. But always remember to choose a regulated and trusted broker like easyMarkets to get the best conditions and be sure you’re trading in a safe trading environment.
Let’s focus on the Scandinavian markets in this article, so then you can decide if they fit your strategy.
Related: Responsible investing in Norway
What are Scandinavian markets?
Most of the time, when people talk about Scandinavian financial markets, they mean the stock exchanges of Sweden, Norway, and Denmark, though some investors also include Finland and Iceland. Of course, there are more than just shares you can trade and invest in within the Scandinavian financial markets, such as bonds, commodities, ETFs, and derivatives, among others, but we’ll mostly focus on shares and stock market indices in this article, as they are the most popular assets for investors and traders.
The Financial Supervisory Authority of Norway (Finanstilsynet) in Norway, the Financial Supervisory Authority (Finansinspektionen) in Sweden, and the Danish Financial Supervisory Authority (Finanstilsynet) in Denmark are the regulatory bodies of the Scandinavian markets, regulating and monitoring some of the most popular companies in the world, such as Carlsberg Group, Equinor (formerly Statoil), H&M, Lundbeck, Novo Nordisk, Orkla, Telefonaktiebolaget LM Ericsson, Telenor, and Volvo Group for instance.
If you’re more interested in trading cash indices from the region, here are the main stock indices to focus on:
- OMX Stockholm 30 Index (OMX30): This market weighted price index is the main index for the Nasdaq Stockholm Stock Exchange, which tracks the performance of the 30most-traded Swedish companies. The index is dominated by companies in the technology, financial, and industrial sectors.
- OBX Index (OBX): This free float adjusted total return index tracks the performance of the 25 most liquid and traded companies listed on the Oslo Stock Exchange in Norway, which joined the Euronext Group in mid-2019.
- OMX Copenhagen 25 Index (OMXC25): This market value weighted index tracks the performance of the 25 largest and most traded companies listed on the Nasdaq Copenhagen stock exchange in Denmark.
Why should you consider investing in these financial markets?
The Nordic region is small, but almost all the main investment possibilities and vehicles are available, and their performances have been equal if not better than other popular areas like the United States. Moreover, the Scandinavian financial markets are highly transparent, liquid, and efficient, which are characteristics every trader is looking for when trading the financial markets.
The Nordic region is known for its high levels of innovation and production, as well as its healthy and stable public finances, high levels of citizen trust, low rates of violent crime and poverty, and low levels of political corruption. Moreover, the ease of conducting business is highly regarded in every country in the region, which helps support the economy. You can therefore invest in blue chips and global brands, as well as interesting small caps with a business mindset that has helped them outperform the markets.
What are the best tips for deciding to trade the Scandinavian markets?
If you’re interested in trading the Scandinavian markets, here are a few things to remember and consider limiting your overall risks and maximize your potential returns:
- Learn more about the opportunities offered by those countries.
- Take a trading course if you need to update your trading knowledge.
- Determine your trader’s profile and risk tolerance to choose the best way to get exposure to those markets.
- Always use money and risk management tools to better protect your trading positions.
- Take time to compare what’s available to find the best broker to invest in the Scandinavian markets according to your trading needs.
- Learn to control your emotions.
- Always follow the economic calendar and local news to know what might influence the markets.
Remember that the Nordic countries do not have the same currency, which means that you might face a currency risk when trading the Scandinavian financial markets, as the Norwegian Krone, the Swedish Krona, and the Danish Krone fluctuate significantly against your local currency. If you think that you need to protect your portfolio against currency risk, you might want to consider hedging techniques.
The best tips to invest in Scandinavian financial markets, written dedicatedly for Daily Scandinavian by Liv Taub.
Feature image (on top): Stockholm Financial district. Photo: Wikipedia