Should you bet half a million on one horse? Denmark's investment account needs diversification

Denmark's government is proposing to increase the deposit limit for the investment savings account, known as the aktскареkonto, from 174,200 to 500,000 kroner. This move aims to make the account more accessible and relevant to a larger portion of the Danish population, which already includes 600,000 account holders.

However, the article's author, Anders Hartmann, CEO of Norm Invest, argues that the account's core limitation, restricting investments solely to stocks and stock-based funds, becomes more problematic with the higher deposit ceiling. He uses the example of a nurse saving 300,000 kroner, who would be forced to invest her entire savings in stocks, unable to diversify into safer assets like bonds.

Hartmann contends that a serious investment portfolio should balance asset types according to an individual's time horizon and risk tolerance. For those nearing retirement or unable to withstand significant market fluctuations, a 100% stock portfolio is rarely suitable. The current structure of the aktскареkonto, he argues, forces ordinary Danes into a high-risk situation, akin to betting everything on one horse.

To address this, Hartmann suggests expanding the aktскареkonto's framework to permit investments in bonds and mixed portfolios. This would allow savers to create a balanced portfolio tailored to their specific circumstances and risk profile while still benefiting from the account's low tax rate of 17%. He points to Sweden's investment savings account as a model that allows bond investments.

The author concludes that while the increased deposit limit is a positive step, a comprehensive revision of the aktскареkonto is necessary. Without allowing for diversification, the account risks exposing ordinary Danes to excessive financial risk, especially with the higher deposit cap.

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But when the account is to be revised anyway, we should think it through completely, so we don't force people like the nurse from before to bet her 300,000 kroner or up to half a million on one horse.