Investing in Bond Funds

Funds and ETFs
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Where do forum members keep their emergency fund? My idea is to keep what I need for daily life in a current account, and in addition to that, funds equivalent to about 3 months’ expenses somewhere else. The goal is to secure the capital from losses, and on the other hand, to achieve a return at least equal to average inflation. In Europe, that would mean about 2-2.5% annually.

I have accounts with OP, Seligson, and Nordnet. OP’s Growth Yield Account would only yield 0.4%, and a fixed-term deposit is currently 2.0% with a one-month term. Less after taxes, of course, which have to be paid every month when the deposit matures. From Seligson’s money market fund, one can expect the 3-month Euribor minus a 0.18% management fee, meaning currently that would be around 1.8%. Evli Likvidi B also often comes up on the forum, which probably invests over a slightly longer term than a money market fund, and thus the risk and return would be slightly higher.

What are your thoughts on these options for this purpose? Are there any better ideas?

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I myself have used Evli Likvidi for the past couple of years specifically for storing my emergency fund. So far, it has offered over 4.5% return for the previous two calendar years. It has nicely and steadily ticked upwards. The YTM has naturally slowly decreased, and according to the latest fund review, only about 3% return is expected for the current calendar year.

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405

I have always had a small piggy bank in my brick-and-mortar bank’s short-term interest fund. There isn’t such a big difference in short-term interest funds that I would bother thinking about them. When redeeming funds from my own bank’s funds, the assets are transferred to my own account without intermediaries or steps.
When I was a Nordea customer, the money was in their short-term interest fund; now it’s in S-Pankki’s equivalent. Osuuspankki (OP) probably has a similar one.

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I keep very little money in my current account, just enough for daily bill payments. I have, for example, six completely free credit/charge cards as an emergency fund: S-pankki VISA, Nordea Stockmann Mastercard, OP K-Plussa Mastercard, Ferratum Mastercard, Amex Basic Card, and Bank Norwegian VISA. The combined credit limit of these cards is 50,000e, which alone would serve as a good emergency fund and costs me nothing, allowing me to keep this money in higher-yielding places, perhaps even in some less liquid investments. I very rarely have any unexpected expenses that couldn’t be handled with credit cards and then paid off about a month later when the credit card bill and monthly salary arrive - and if the bill is really large, there’s always about a month to transfer money from, for example, Nordnet or other savings accounts to the current account.

However, I don’t want to rely solely on those credit cards, so I also have a proper emergency fund. My actual emergency fund is always in a savings account that offers the best interest rate. I mainly check that the account is under some deposit protection and doesn’t have too many withdrawal restrictions. In practice, I check it here: Säästötili tai talletustili: Katso vertailun (2025) paras talletuskorko. Sometimes it has been Bank Norwegian, Svea, Instabank, etc. Now it’s Collector Bank, which offers a 3% interest rate. I don’t bother changing them every year if the interest rate difference isn’t significant, but if I can get a 1%-point better return from somewhere than my current savings account, I change quite readily, because nowadays switching them is so easy as everything is handled electronically without major delays.

I currently have about 42,000e in my emergency fund at Collector Bank. I very rarely use the emergency fund for any unexpected daily expenses, because I have credit cards and my salary comes every month. But it’s more reassuring to have some actual liquid cash somewhere, not just cards. Actually, for me, this is a bit of a mix of an emergency fund and a liquid “war chest” for when the market is turbulent and good buying opportunities arise. If there were another market crash or similar, I would probably pull almost all of this emergency fund into the stock market and leave only a couple of thousand in the emergency fund. Then, when there aren’t really any good buying opportunities in the stock market, I let this emergency fund grow larger, as has somewhat happened now.

I also have a war chest in Evli Likvidi B, which I think currently holds about 100k euros, but I wouldn’t put any more euros into it myself, as the best returns are already gone, and it probably won’t yield enough annual return compared to the best savings accounts in a year or two. I will probably realize the Evli Likvidi holdings within a year or two and transfer the money to stocks and Collector Bank or a similar savings account, depending a bit on the development of interest rates and the market. In addition to these, I also have Nordnet’s portfolio credit limit, which I mainly use for short-term investment loans if there’s a sudden market crash and I don’t happen to have money in my Nordnet account at that exact moment. But in an absolute emergency, I could also use Nordnet’s credit as an emergency fund and withdraw, say, 20k euros to my account - of course, I would pay interest on it, but this way I can keep more money in stocks or bond funds.

It’s also worth calculating a cost for keeping cash in an emergency fund with a worse return than in stocks - meaning it’s not necessarily about just seeking the best return for emergency fund assets, but also considering alternatives where you can reliably and quickly get money with reasonable payment terms / interest in an unexpected situation. I myself could easily manage entirely without an emergency fund, relying solely on credit cards and Nordnet’s credit, and be all-in on stocks with my cash.

But in short, my emergency fund consists of:

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407

A bank account is also a less risky option than funds if the amounts are below the deposit guarantee. In practice, short-term interest rate funds contain corporate papers, albeit very short-term ones. They therefore still have some kind of (very small) credit risk.

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This post was good, it made me think about what to do with my own money. I currently have a buffer of about 6000 euros in a Norwegian savings account plus, but I don’t plan to grow it any further. I’ve also applied for a limit from Nordnet, so I can utilize that with a couple of credit cards. So, I guess I’ll just shove all extra money into the stock market to grow from now on.

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410

What bond fund(s) would you recommend for 70-year-old seniors (my own parents) to balance their portfolio, from Nordea’s or Nordnet’s selections?

Currently, most of their investable assets are in direct equity funds and cash. The investment horizon is 5-10 years, and the intention is to start withdrawing “supplementary pension” from the investments in the future, so significant volatility is not desired. The total portfolio size is under 100k (euros), if that has an impact on allocation/selection.

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At that age, I would probably primarily put the money into the best-yielding savings account, i.e., the highest interest rate from here: Säästötili tai talletustili: Katso vertailun (2025) paras talletuskorko. Or perhaps into a 12-month fixed-term deposit with a 3% interest rate. Maybe I’d still keep some in equity funds and then, whatever “extra pension” is intended to be withdrawn, I’d move to a savings account / fixed-term deposit. This way, they can enjoy some extra pension without worrying about the market direction, but they don’t have to keep everything in a lower-yielding asset in their portfolio.

I just don’t see bond funds as attractive investments anymore with the decline in interest rates. The best returns are already gone. If I absolutely had to put money into something, it would be Evli Likvidi B, but even there, the YTM is only 2.86% – so if you put your money there now, you’ll probably only get about a 3% return. Why take that risk when savings accounts/fixed-term deposits offer a slightly better, almost guaranteed 3% return? Euro bond funds might offer a better return than that if one believes that interest rates will fall close to zero again, but I, for one, believe more that they will stay around 2% for some time.

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However, a fund allows for compound interest, which fixed-term deposits do not provide.

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Technically speaking, that too is compound interest when you chain time deposits and reinvest the received interest. Funds also buy interest-bearing securities that mature and then reinvest the principal + interest received. So, essentially the same thing but of course automated.

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Adding to this, if you put money into Collector’s savings account or Sweep bank’s savings account/fixed-term deposit, you also don’t have to pay taxes on the profit until later, in connection with the tax return, because no withholding tax is applied to these, meaning you can also invest compound interest at the end of the year without the tax authorities immediately getting involved with those returns. From these interest incomes, you can also deduct stock sales losses, because withholding tax is not automatically applied by these banks.

A fund is certainly easier and generally better tax-wise, but it also depends a bit on your own needs whether a fund is so much better tax-wise. For example, I specifically want as much interest income as possible from Collector and Sweep bank to accrue this year, because I can then deduct Kamux’s sales losses from those interest incomes without having to sell another stock from my portfolio at a profit or deduct losses from dividends. I don’t want to sell my interest funds yet this year, so I cannot make deductions from their returns yet.

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You fall quite far behind in returns if you pay taxes every year.

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People over 70 should start selling and buying all kinds of services for themselves.

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I am a 25-year-old keen investor. So far, I have only invested in direct stocks and equity ETFs (currently about a 50/50 split between these). I have been thinking that I would like to add fixed-income investments to my portfolio. I was thinking of an initial weight of about 10% of the portfolio, and the portfolio is currently around €50k, if that matters. I thought that this fixed-income investment could also serve as a buffer for good stock buying opportunities, while also providing good diversification to the portfolio. What kind of fund or ETF do you recommend? The fixed-income world is not very familiar to me yet. Would it be good if the fund includes both government and corporate bonds (e.g., VAGF or EUNA)? In my other ETF investments, I have liked that the fund reinvests the dividends itself. On the fixed-income side, it’s probably good to keep the same principle, unless you want cash flow?

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418

I’m still confirming with you, the wiser ones, if it’s safe to park money in Collector’s and Sweep Bank’s savings accounts/fixed-term deposits? So why, for example, can these two pay better interest rates than competitors? And I also want an answer to why these two don’t have withholding tax (or any tax automatically annually) deducted? Don’t Bank Norwegian and Svea Bank at least automatically deduct taxes from (savers’) income annually?

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You are asking in the wrong thread, but I will answer anyway. Someone can then move these to the correct thread.
Collector and Sweep are both covered by deposit guarantee (note: Collector’s deposit guarantee is in kronor, so it’s likely 94-95 thousand euros).
Both do business with high-interest loans, just like their competitors. They want to attract deposits by paying a slightly higher interest rate than their neighbors.
As far as I know, Bank Norwegian does not levy withholding tax either. Svea has a branch office in Finland, and for this reason, they levy withholding tax.

To clarify: if withholding tax is not levied, then the interest is capital income.

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I would trust them and dared to put almost 50,000 euros into Sweep bank. I would put Svea, Ferratum / Sweep bank, Collector, Instabank, TF Bank, and Bank Norwegian all into roughly the same category, specifically those banks offering high-interest loans. These banks have long offered their savings accounts in Finland, and I believe I have used all of their savings accounts at some point. All have received banking licenses in Europe and all can be found on the Financial Stability Authority’s website: https://rvv.fi/talletussuojajarjestelman-pankit . I personally don’t see any of them as more reliable than another. Behind Ferratum / Sweep bank is Multitude Bank, which Inderes also follows. None of them is some fly-by-night bank that you couldn’t trust at all. The question probably is whether one trusts the EU deposit guarantee scheme – I, for one, trust it, as something in this world must be trusted. I once had a bank go bust where my savings were – it was the Finnish Sofia Pankki back then, and all the money came back with interest.

This has been discussed more in another thread, to which this discussion could also be moved: Parhaiten tuottava säästötili - #1140 käyttäjältä elakkeelle35v - Raha & säästäminen - Inderes forum

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422

Thanks for the answers Tmpr2000 and elakkeelle35v.

Now, back to the main topic. What do you think about Evli’s proposal for a fixed-income investment (bond portfolio)? So, I’m interested in all related matters (are Evli’s fees reasonable, is now the right time to go into fixed income, is the diversification good)?

Evli Nordic High Yield B: 7 %
Evli High Yield Corporate Bond B: 8 %
Evli Nordic Corporate Bond B: 35 %
Evli Short Corporate Bond B: 50 %

And as a comparison, is it more sensible to take a similar fixed-income portfolio through Mandatum?

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In Finland, there are two good fixed income managers; EVLI and Mandatum. Mandatum is more internationally awarded and larger in size. The other big ones aren’t exactly bad either.

I wouldn’t see a reason why you wouldn’t ask for an offer from Mandatum as well.

For a fixed income portfolio under 1 million euros, I wouldn’t start dividing it between two different asset managers. Put it all with whoever you click with best.

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Did Evli already tell you the preliminary cost of the bond portfolio? Or is it purely the fund management fee?