Hey Inderes community! I joined because you have such interesting discussions and I always learn something new.
I’m a beginner small investor with a medium-sized starting sum. My applications for an Investment Savings Account (OST) and a Regular Securities Account (AOT) are currently being processed by the bank. Now I’m studying the ABCs of investing and putting together my first investment plan, strategy, and portfolio. I’m already somewhat familiar with the basics: diversification, buy and hold, taxation principles, dividends vs. growth companies, etc.
I’m thinking of setting up both an OST and an AOT, for slightly different purposes. I’d be interested to hear if this idea makes any sense to you more experienced folks? :
I’d like a combination of i) sensible and long-term wealth accumulation with medium risk (70% of initial capital), and ii) entertaining, more risk-seeking “gaming” with the goal of faster wealth growth (30%). (In addition, I keep the rest of my savings in basic accounts so I always have enough for living; and I transfer something to my investment accounts monthly). There isn’t really a target time frame, but generally, we’re thinking long-term, unless I need to withdraw for a home or car at some point, etc.
Which account would you recommend for which purpose? I was thinking AOT primarily for the first option, and OST for the latter.
Additionally, I’m pondering the more specific contents of the portfolio across these different accounts: OST: Into domestic dividend cows and growth companies, actively rebalancing. The risk can be quite high. Benchmark index OMXH25. For example, Inderes’ model portfolio. I would reinvest dividends immediately to compound. AOT: Into domestic and foreign growth companies and also stable foreign dividend cows, with less active trading and a more balanced risk. Benchmark index, for example, Stockholm or Copenhagen.
And as an additional question to this: now that the boom in opening OST accounts is underway and possibly new small investors will soon enter the market because of it, and trading through OST accounts officially starts on 1.1.2020, is it better for a strategic and patient investor at this stage to wait and see how the domestic stock market reacts to the increase in stock demand at the beginning of the year? Or is it advisable to lurk and be quick to buy right at the beginning of the year?
Almost instinctively, it would feel more moderate to stay out of the OST competition at the beginning of the year and turn one’s attention to investing through an AOT account according to the preliminary strategy mentioned above. Thoughts?
Your plan sounds perfectly reasonable to me. It’s also nice to see that you have a strategy.
What bothers me a bit in the general discussion around OST (Osakesäästötili - Share Savings Account) is the idea that it’s a free lunch, especially concerning trading. However, one must remember that for an OST, you need to be a profitable trader. If you’re making losses on an annual basis, I believe an OST causes more harm than good. Well, who would intentionally make a loss, right?
So, I personally trade and plan to continue using an AOT (Arvopaperikaupan tili - Securities Trading Account) for now, because it has several benefits from a trader’s perspective, even if it doesn’t offer the same tax benefits. At some point, I do intend to start using an OST as well.
P.S. There’s also a dedicated topic on the forum for the share savings account, where you can find many thoughts on the matter.
It depends a bit on the initial capital, but I would keep the share savings account purely for dividend companies. For growth companies, you can take advantage of the acquisition cost assumption through an AOT (Securities Account). In addition, active trading on the OST side. Then the growth companies go to the AOT.
By the way, from a tax optimization perspective, you can also buy English and apparently Estonian companies for a share savings account.
I’m assuming your starting capital is under 50k euros?
If I were you, I’d probably just pump everything up to 50k euros into an Investment Savings Account (OST) until it’s full. Then I’d start buying longer-term papers into a regular brokerage account (AOT) and lighten up on the OST side if you want to add riskier and/or trading positions there.
The logic is that there’s no point in paying taxes on dividends at this early stage if you don’t need the cash flow right now, meaning the goal is to grow capital over a 10+ year horizon.
{“content”:“I was pondering the same things a little over a month ago. I concluded that I wouldn’t open a stock savings account at all for now. To me, a stock savings account looks like a piggy bank, which will lead to tears if you suddenly need the money.”,“target_locale”:“en”}
It’s better to take out a loan then. It’s quite rare to encounter situations where you’d need to liquidate your equity savings account if the expenses aren’t related to housing. If you need money for housing, a loan is so cheap that the tax benefit will cover current interest rates many times over. It’s a different matter if you know you’ll need the money, then it probably wouldn’t be worth transferring your assets to an equity savings account (and yes, of course, through cash x)). In that case, you shouldn’t even keep those assets largely in stocks with an AOT (Arvopaperi ja Osakesäästötili – Securities and Equity Savings Account).
How is that a problem? As I understand it, you can withdraw any amount you want, and then you pay tax on the profit share, which is the tax you would have had to pay with an AOT anyway.
I see it as an OST giving you the “option” of compounding interest also on tax portions… Especially if you plan to trade even a little or focus on high dividend yields, this is significant over 10 years.
But indeed, OST is at its best for a beginner investor who takes risks and will also benefit from the compounding effect over a longer period, and who has cash to invest without having to liquidate current holdings.
Well, that’s just one reason. I’m not saying no one should put money into a stock savings account, but it’s worth carefully considering whether you’ll be able to stay within all the prerequisites long enough. Those have been discussed in the Stock Savings Account thread. For example, a stock savings account can’t be used as collateral for a loan.
I would use an investment savings account (OST) for active trading in growth companies with Finnish and foreign stocks. I would not favor dividend stocks, because for them a traditional brokerage account (AOT) offers a tax advantage (25.5% vs 30%) and dividend taxation of foreign stocks with an OST is still unclear.
It’s worth remembering that the tax benefit is relatively small. Here’s a quick calculation with a 5% dividend and an initial sum of 50k€. This is the OST after taxes, having grown within the account until that year. After 6 years, the AOT is up by 365€, and that’s the bottom of this curve. After 11 years, the OST moves into profit by about 100€, and the rest is history.
I’ve been thinking about this OST (Osakesäästötili - Share Savings Account) thing from my own perspective and decided to move some of my trading to an OST after all.
The tax benefit is undeniably clear, even though it does limit some possibilities.
That’s why I’m also keeping an AOT (Arvopaperikaupankäyntitili - Securities Trading Account), which has limits, short selling, and other opportunities.
However, an OST works well as long as you can make long trades
In my opinion, part of a beginner investor’s toolkit should be some form of automated investing into a fund or ETF.
For example, if one has 500€/month to invest, 250€ could go directly into stocks, 125€ into super funds, and 125€ into an S&P 500 ETF.
This way, everyone gets to make investment decisions, but it also pulls the expected returns closer to the index. The 50/50 ratio can then be adjusted over time as one understands how to be a successful investor.
I’ve got similar things on my mind too. Now that I’m getting money from Hoivatilat, I’ve been wondering whether to put the whole lot into an OST or AOT. I’m thinking of replacing Hoivatilat with companies like Qt, Revenio (finally), and possibly Harvia. The goal is to buy and hold for a really long time.
None of these pay much in dividends, so would the OST benefits just go to waste? On the other hand, the little bit that does come in as dividends wouldn’t be taxed, so even a small plus is a plus. And as was written above, you could later (when the OST has exceeded 50k) sell them within the account and buy dividend companies instead, and then buy these back into an AOT. Assuming the OST terms remain the same as now.
The downside is that these wouldn’t serve as collateral for a loan, unlike those in a securities account. However, I probably wouldn’t be taking out an investment loan in the near future anyway, at least not in this market situation.
So perhaps I’ll just transfer the money I get from Hoivatilat to an OST and buy the companies I listed above, even though they don’t pay much in dividends. I can always change the situation later, once the total of 50k has been transferred to the OST.
I’ve now decided to open an AOT alongside my OST. The AOT will be for stocks I try to buy and forget. The OST will be a sandbox for a while. I don’t know if the market is always like this, with hype moving from one sector to another? I’ll be trading more with the OST, e.g., in the hydrogen/EV sector now. I’ll probably burn my fingers, but at least I’ll get a feel for investing.
Hopefully, the AOT will then teach me to sit on my hands.
As I said, my investment plan is still looking for the right track for me.
I’m quoting from this thread for a dumb question from a beginner investor; however, I believe it’s partly related to the choice between an Investment Savings Account (OST) and a Regular Securities Account (AOT):
Acquisition cost presumption (Hankintameno-olettama - HMO). Dumb question, but if I buy one share of company X per month for ten years, after which I sell all of them. How is HMO calculated in this case? Can HMO only be applied to the first share, and all others are taxed at their full value?
