By Zack Devin
For hundreds of years, investors have been trading stocks in Denmark, dealing in the shares of some of the most famous companies in our nation’s history. Trading originally took place in dedicated rooms in Copenhagen’s Børsen, where brokers and investors would exchange prices, stock tips, and fortunes were made and lost.
What are stocks?
Stocks are probably the most important financial asset, and make up the majority of most private pensions and investment funds. For most people stocks and property make up the majority of their overall wealth.
That said, stocks are not as simple as they seem. They come in many different types and subcategories, and can be arranged according to sector, country of issue, country of operations, voting rights and more. One thing all stocks hold in common is that they involve ownership of a share of a company, giving you variable rights to future profits, often voting rights on board decisions, and so on. Though the majority of stock investors view them as an asset, yielding (as in the case of dividend payers) or not (when sold for capital accumulation), but they in fact represent fractional ownership of a company.
What kinds of stocks exist?
Stocks, known interchangeably as shares, stocks and shares, or similar, come in various types. Some companies have founders or senior executives determined to retain control of the company, so they only issue stocks to the public with no voting rights. This gives you all the financial benefit of owning part of the company, but does not allow you to vote on board decisions.
Voting rights is juts one way stocks can vary. Some shares are more ‘senior’ than others, meaning they give additional rights (and usually trade at a higher premium). All stocks that are publicly traded must be listed on an exchange, with a price to buy and sell – the difference being known as a spread.
What do I need to know?
You can trade stocks through a broker, either over the phone or online, using an online platform. To trade stocks successfully, you need to be familiar with a few key terms:
Price: An obvious one, price refers to the current market value of a stock. This can fluctuate significantly, and tends to increase over time. Long-term studies have shown equities are the best-yielding asset globally, so they are very important in retirement portfolios.
Spread: The difference between the buying and selling (bid and ask) spreads offered by market makers. Spreads are now very small for major equities, but may be larger on smaller exchanges and for thinly traded stocks.
Volume: The number of shares traded in a market session. The higher the volume, the more liquidity available. Sudden spikes in volume associated with declines in price can be a sign of a mass exodus from a stock.
Market capitalisation: The number of shares outstanding multiplied by the share price. Though it is a favourite of financial journalists, it is basically meaningless for business operations.
How are Danish stocks traded?
The Danish market takes place mostly on the NASDAQ Copenhagen exchange, the successor to the original Copenhagen Stock Exchange. NASDAQ are known for their US Exchange that focuses on giant technology companies, and also run stock markets throughout the Nordic countries.
Who offers retail accounts in Denmark?
Most banks and brokerage houses will allow you to open a retail account, although their minimum account sizes vary. Saxo is one example of a well-known Danish firm offering retail accounts, but others exist too. Check the terms and conditions of any new account you open to make sure the provider is right for you.
Conclusion
Owning stocks is a critical part of almost every credible retirement plan. Even if you don’t own them yourself, chances are your state and private pension plans invest heavily in equities. Sometimes this will be done via an intermediary, such as a mutual fund or ETF, but many funds will also hold equities directly.
If you choose to buy stocks yourself, be sure to research them thoroughly. Do not over-concentrate your portfolio with a few holdings, and try and avoid having too many well-correlated assets. Above all, confirm the financial health of any companies you invest in using their statements. Remember you can share in the gains of equities by both passive and active investing – for many investors, a low cost tracking ETF of a suitable index is a better strategy than attempting to pick stocks themselves.
