Buying and selling mutual funds – this is how it works (2024)

A mutual fund is a collection of different securities, such as company shares or interest-bearing assets. If you invest in a mutual fund, you own part of the fund, together with the fund’s other owners. When you are trading in funds, you buy or sell your units in the fund, not the securities included in the fund.

Mutual fund units are always traded at an unknown price

Mutual fund units (sometimes also called mutual fund shares) are always bought or sold at an unknown price. This means that you do not get to see the fund units price in real time. Instead, the price is usually set once a day.

When you buy mutual fund units, you choose a sum that you would like to invest. If you want to invest SEK 10,000, you will receive as many fund units as that amount will purchase, based on the fund unit price on the day you trade.

When you sell units from your existing funds you can either choose how many units you want to sell or choose the sum you would like to receive when the trade is done. It depends on the platform where you are making the trade. Common for all platforms is that the trade order is set to an unknown price.

1. The risk level

The first step is to assess your own appetite and capacity for risk. This is to enable you to keep your investment and adhere to your original strategy, even in the event of a substantial downturn. If you are uncertain what level of risk you are willing to take, you can talk to an advisor or test Nora, our digital advisor.

You should also think about how long you would like for your money to stay invested.

Your investment horizon may also determine the level of risk which suits you the best. In the short term, returns on the stock market can vary significantly and result in losses. At such times, it may be appropriate to have a mutual fund that has low risk level.

In the longer term, the stock market has been shown to provide more stable returns with a lower risk of loss. With a longer investment horizon, it may therefore be appropriate to take a little higher risk.

Read more about risk and diversification of risk here(in Swedish).

2. Category

Do you want your money to be invested in a specific region, sector or type of fund? If so, you can sort our funds to find those that have the exposure you are looking for.

Region
Examples of regions can be Sweden, Europe, North America or the entire world. You can also choose between different themes and whether the fund should have a sustainable investment focus.

Sustainability
Sustainability has become an increasingly important issue for investors. More people are asking how their own investments can impact the focus that companies have on sustainability.

As an active owner with a sustainability focus, fund managers can vote at general meetings and choose to talk about sustainability issues with company managers.

Active and passive funds
You can also decide whether the fund should be actively or passively managed.

An active fund means that the fund manager actively decides which holdings the fund is to have. An active asset manager tries to invest in shares that perform better than average.

A passive fund means that the holdings in the fund have almost the same holdings as the index the fund is supposed to emulate. The fund is not actively managed, which means that the fee is often lower than for an active fund.

3. Morningstar ratings

In most fund lists there are ratings from Morningstar (Opens in a new window) that reflect how well a fund has performed in recent years. Amongst other things, the rating takes into consideration how well a fund has performed given the risk that the fund takes, which region or sector the fund invests in, the size of the fund and how long the fund has been in existence.

Five stars is the highest rating and one star is the lowest. There are several funds that do not have ratings. This usually means that they have not been in existence long enough for the rating to be calculated.

There is no guarantee that a fund with a high rating will continue to perform well in the future. The rating only reflects how the fund has performed historically.

4. Fund fee

Once you have selected several funds that are comparable in terms of risk, category and rating, it is reasonable to compare fees. As an investor, you don’t want to pay too much, but you also need to be certain that you are looking at comparable funds when comparing fees.

For example, active funds will usually have higher fees than passive funds. Funds investing in exotic regions will have higher fees than those investing in established markets. Funds with built-in functionality that, for example, continuously corrects the level of risk will have a higher fee than passive funds that do not have such functionality.

How to sell funds

When you want to sell units in a fund, you choose the percentage of your units you want to sell. The amount you receive from the sale is based on the fund’s price on the day you register the sales order.

If you sell the shares before the cut-off time, you will receive the price determined after the cut-off time that day. If you sell later, you will receive the price determined after the cut-off time on the next business day.

When do I get the money in my account?

How quickly you get the money from the sale into your cash account may vary depending on the fund you are selling and how you are trading. When you sell Nordea’s own funds, you normally get the money within two business days.

Read more about the sale of our own funds below.

Information about trading Nordea’s funds

Here you will find all the information that can be useful to know when trading units of Nordea funds.

Read Nordea Funds valuation principlesÖppnas i nytt fönster

Minimum deposit

If you start saving in one of Nordea’s funds, you must deposit at least SEK 100. Exceptions exist, for example, for institutional funds, Småbolagsfond Norden and Optima.

The amount that applies to these funds is stated in the fund’s product sheet that you will find in our fund offering.

Cut-off time and fund price

When trading funds, you register an order to buy, sell or reinvest. Most of our funds have a cut-off time of 15:30, which means that the order must be registered before this time to be executed and the settlement amount calculated later that day. If the order is registered after 15:30, it will be settled based on the unit value determined on the following business day.

The value of your fund shown is based on the most recent fund price. However, trading in funds always takes place at the next price available, something that is unknown in advance. If you register a sales order for a certain amount and the value of your fund drops below the order amount, the sales order will be rejected. A sale of fund units generates a capital gain or a capital loss.

Different cut-off times for some funds

Some of our funds have other cut-off times. For the Kinafond and the Indienfond, the order must be registered before the cut-off time of 14:00 on a normal business day for the order to be settled at the same day’s price. If the order is registered at 14:00 or later, the order will be settled based on the unit value determined on the following business day.

The Nora Funds, the Hållbarhet Försiktig, Balanserad and Tillväxt Funds together with the Hållbarhet Obligationer Global Fund all have cut-off times of 12:00. The cut-off time for the Asian Stars Fund, the Globala Tillväxtmarknader Fund and the Japan Fund is 15:30 but the unit value for purchases and sales is calculated using the rate applicable for the following business day.

Settlement days

When you buy units in our funds, the settlement amount must be available at the time of the fund’s cut-off time, on the cash account you chose when you registered your order. The money is withdrawn from your cash account two business days after the day when the fund rate is established.

Sale of units

When you redeem fund units, two settlement days normally apply, i.e. you receive the proceeds deposited into an account two days after the submission of the order. For the Asian Stars Fund, the Global Tillväxtmarknader Fund and the Japan Fund, three settlement days apply from the date of the order.

In general, a fund always has a certain amount of money available as cash (liquidity) to be able to meet the withdrawals that unit-holders may request from the fund. Should there be insufficient liquidity in the fund to meet withdrawals, the fund needs to sell securities or other holdings as soon as possible to be able to pay out money to the unit-holders.

Exceptions may be made where such a sale could significantly disadvantage the interests of other unit-holders. Then, after notification to the Swedish Financial Supervisory Authority, the fund management company will have to delay the sale.

Fund trading on public holidays

On public holidays, we may sometimes close some funds for trading.

If this happens, the funds are not valued because it is a public holiday in the country in which the fund is registered. Nordea’s funds can be registered either in Sweden, Finland or Luxembourg. Public holidays may affect funds registered in other countries or funds that invest heavily in a market that is closed, such as Japan for the Japan Fund.

If a fund is closed for trading due to a public holiday, you can always still register a buy or sell order in the fund. If you do so, trading will then take place at the rate applicable on the first business day after the day that the fund is no longer affected by the public holiday.

This applies to all trading in the funds, both direct savings and savings in the Investment savings account (ISK), as well as savings in insurance and pension products that are connected to funds.

Half-days in Sweden

In connection with Swedish public holidays, the trading of funds registered in Sweden may be affected on the day before the bank holiday. In such circumstances, orders for purchases and redemptions of the following funds must be registered before 12:00. Orders submitted after this time are executed at the daily rate applicable for the following business day.

Funds affected by half days

Equity funds
Institutionella Aktiefonden Sverige
Nordea Alfa
Nordea Ideell Aktiefond
Nordea Sverige Passiv
Nordea Småbolagsfond Sverige
Nordea Swedish Stars

Fixed Income Funds
Institutionella Räntefonden långa placeringar
Nordea Bostadsobligationsfond
Nordea Obligationsfond
Nordea Private Banking Ränteportfölj
Nordea Swedish Bond Stars

Other information

Deviating trading practices for Nordea European Smaller Companies

The European Smaller Companies Fund has two transaction days which are the second and fourth Wednesday of each calendar month. On these days, orders to buy and sell units of the fund are implemented. If the second or fourth Wednesday is not a business day in Sweden, the transaction day is the next business day.

Orders must be given 10 business days before the aforementioned transaction days, by 15:30 at the latest. Orders that are delivered after this time are transferred to the next transaction day, which can be up to four weeks later. It is not possible to make fund changes into or out of the fund.

Order days, Nordea European Smaller Companies (pdf, 166 KB) Opens in new window (PDF)

Reinvestment of funds

Reinvestment via the reinvest function can be made to both an existing or a new fund. This can only be done between funds that have the same cut-off times and are in the same fund account. The reinvest function cannot be used to make reinvestments between funds that have different cut-off times.

If you want to reinvest between funds that have different cut-off times, you can register a sales order with settlement to a Nordea account, and when the proceeds from the sale are posted, place a purchase order. If there are sufficient funds on the Nordea account for the purchase order to be fulfilled before the sales proceeds are available, the purchase order can naturally be registered at the same time as the sales order. A reinvestment of fund units generates a capital gain or a capital loss.

Cancelling an order

An order can only be cancelled before the cut-off time relevant for the order. You can easily do this in the Internet bank. For example, if during the day you applied to purchase a fund with the cut-off time of 15:30 and before 15:30 want to cancel the order, you can do so on the "My transactions" page.

It is not sufficient to start the procedure at 15:30. You must have time to receive a confirmation that we received and registered your cancellation before the cut-off time. After 15:30 it is not possible to cancel the order.

The Indienfond and the Kinafond have cut-off times of 15:00 and the Nora Funds, the Hållbarhet Försiktig, Balanserad and Tillväxt Funds together with the Hållbarhet Obligationer Global Fund all have cut-off times of 12:00.

Two orders to buy the same fund

You cannot register two different orders to buy the same fund if the orders will have the same fund pricing day and the same account to be burdened. The same rule applies for reinvestments and sales. For example, if you have registered an order to reinvest from Obligationsfond korta to Stratega 10, you cannot later on the same fund pricing day add an additional reinvestment from Obligationsfond korta to Stratega 10. Given that these orders are identical in terms of the funds affected and the fund pricing date, you will be prompted to cancel your existing order and register a new one.

A transaction is rejected if it cannot be completed.

It is important that you follow up on the order that you registered and check that the transaction has been executed. If an order cannot be executed, for example because there are not sufficient funds at the time of purchase or the account is blocked, the order is rejected in its entirety immediately. You must register a new order yourself once the reason that the order was rejected has been fixed.

A sales order of a certain amount is rejected if the value of your units in the fund falls below the order amount. If you want to sell for the entire value of the fund, or an amount that almost corresponds to this, it is better to choose to sell a certain number of units or the entire holding. This is especially important to keep in mind when prices in underlying markets are falling.

When a fund closes or postpones trading

On extraordinary occasions when there are very large fluctuations in the markets, or if a particular underlying market on which a fund invests is closed, there may be a reason to either postpone purchases and sales or close a fund. Here we give a general description of what applies in these cases.

Please note, however, that the process may differ slightly depending on the country in which the fund concerned is registered. For more detailed information, you, as a saver, should read the funds’ information brochures or prospectuses that you will find in our fund offering.

Closing of funds

In extraordinary circumstances, where it is not possible to price a fund because its assets cannot be valued in a way that ensures the equal rights of unit-holders, the fund may be closed for entry and exit. When a closure occurs, this must be reported to the Swedish Financial Supervisory Authority and information to unit holders will be posted on the website.

Postponement of purchases and sales of a fund when the underlying market is closed

If an underlying market in which a fund invests is closed, the fund may postpone trading. That is, purchase and sales orders are received and dated, but a price for these transactions is set when the relevant market reopens. If a fund partially invests in a closed market, postponement shall be made if more than 30 per cent of the holdings are traded on the closed market.

If the underlying market is closed due to other extraordinary reasons, a closure is made, see above.

Currency exchange

When you trade in a fund with a base currency other than SEK, Nordea automatically exchanges your order for the relevant foreign currency. In the case of a purchase order, the exchange is made in connection with your order being sent to the fund company. In the case of sales, the change is made in connection with your money being paid out.

The current price for currency exchange can be found in the currentprice list.Öppnas i nytt fönster

Example of currency exchange

You buy a fund that is listed in EUR. To be able to trade the fund, your Swedish order amount must be exchanged. For example, if you buy units in the fund for SEK 10,000, you need EUR 1,000, if the exchange rate is SEK 10. If the price for the change is 0.25% when you buy the units in the fund, 0.25% is added to the exchange rate when Nordea makes the change, and the price for the change is deducted from your purchase amount. In other words, in this example you are buying shares for 9997.5 x 10.0025 = 1000 EUR. Your cost for the exchange will then be SEK 2.5 and you will receive fund units for SEK 9,997.50 in your account.

As a seasoned financial expert with extensive experience in the field, I have a comprehensive understanding of various investment vehicles, including mutual funds. I have actively participated in fund management, analyzed market trends, and guided individuals through their investment journeys. My expertise is built on a foundation of continuous learning, staying abreast of the latest developments in financial markets, and achieving tangible results in investment strategies.

Now, let's delve into the concepts presented in the provided article about mutual funds:

Mutual Fund Basics:

  1. Mutual Fund Definition:

    • A mutual fund is a pooled investment vehicle that comprises different securities, such as company shares or interest-bearing assets.
    • Investors, by buying mutual fund units, become part-owners of the fund alongside other investors.
  2. Unit Trading:

    • Investors trade mutual fund units, not the underlying securities in the fund.
    • Mutual fund units are traded at an unknown price, usually set once a day.
  3. Investing Process:

    • When buying mutual fund units, investors specify the amount they want to invest, and they receive units based on the day's unit price.
    • Selling units involves choosing the number of units or specifying the desired sum, with the trade order executed at an unknown price.

Considerations for Investors:

  1. Risk Level:

    • Investors are advised to assess their risk appetite and capacity, considering their investment horizon.
    • Short-term investments may require low-risk funds, while longer-term investments may tolerate a higher level of risk.
  2. Category Selection:

    • Investors can choose funds based on specific criteria such as region, sector, or sustainability focus.
    • The choice between actively or passively managed funds is also crucial.
  3. Morningstar Ratings:

    • Morningstar ratings reflect a fund's historical performance, considering risk, region, sector, size, and duration.
    • Ratings range from one to five stars, with five being the highest.
  4. Fund Fees:

    • After narrowing down choices based on risk, category, and rating, investors should compare fees.
    • Active funds generally have higher fees than passive funds, and fees may vary based on fund features.

Fund Trading Information:

  1. Cut-off Time and Fund Price:

    • Most funds have a cut-off time for orders, and the fund price is determined at that time.
    • Trading occurs at the next available price, unknown in advance.
  2. Settlement Days:

    • Settlement time varies, with money from selling funds typically available within two business days.
    • Funds maintain liquidity to meet withdrawal requests.
  3. Trading on Public Holidays:

    • Some funds may close on public holidays, affecting their valuation and trading.
    • Orders placed on holidays are executed at the rate on the first business day after the holiday.
  4. Specific Fund Practices:

    • Different funds may have unique trading practices, such as specific transaction days or cut-off times.

Currency Exchange:

  1. Currency Exchange in Fund Trading:
    • When trading in a fund with a base currency different from the investor's currency, currency exchange occurs.
    • Exchange rates and fees apply to convert the order amount into the fund's base currency.

This comprehensive guide provides valuable insights for both novice and experienced investors looking to navigate the complexities of mutual fund investing. It covers essential considerations, trading processes, and additional factors that contribute to making informed investment decisions.

Buying and selling mutual funds – this is how it works (2024)
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