"It is when we all play safe that we create a world of utmost insecurity." — Dag Hammarskjold, Swedish statesman and United Nations official.
Sweden has a highly competitive capitalist economy with a universal welfare system known as the "Nordic Model." With its diverse and high-tech economy, global investors like the country's stability. The country remained stable during the tech bubble of 2001, the global economic crisis of 2008, and other money crises.
- Sweden has a capitalist economy, making it a unique place for global investors.
- One simple way to invest in Sweden is by buying the iShares MSCI Sweden Index ETF (NYSE: EWD). Advanced investors should look at the many ADRs.
- There are many pros and cons that international investors should think about before investing in Sweden.
Sweden's Robust and Growing Economy
Sweden's economy evolved from farming to industry during the 19th century. By the 1930s, the country had one of the highest standards of living in the world. The country took a neutral position during both world wars and benefited from later post-war booms. It also had slower growth rates in the 1970s through the 1990s.
In the 1980s, Sweden had a real estate and financial asset bubble driven by a rapid increase in lending. These issues came to a head during an economic crisis in the 1990s, which was caused by the restructuring of the tax system. After the collapse, the country's gross domestic product (GDP) fell by 5% between 1990 and 1993. During that time, unemployment soared.
The government ended up buying the troubled assets. The crisis drew to a close by the late 1990s. As of 2019, Sweden's economy had grown to become the eighth most competitive in the world with strong GDP growth prospects and low inflation.
Investing in Sweden with ETFs and ADRs
The easiest way to invest in Sweden is through an exchange-traded fund (ETF). An ETF provides instant diversification in a U.S.-traded security. With $390 million in net assets and almost 40 holdings, the iShares MSCI Sweden Index ETF (NYSE: EWD) represents the most popular option for investors who are looking to invest in the country.
Some other ETFs with Swedish exposure include:
- FTSE Nordic 30 ETF (NYSE: GFX)
- S&P International Developed High Beta Portfolio (NYSE: IDHB)
- Europe SmallCap Dividend Fund (NYSE: DFE)
Investors who are looking for more direct exposure to Swedish stocks may want to look at American depository receipts (ADRs), which are U.S.-traded securities that mimic the actions of foreign stocks. Many of these ADRs trade on major U.S. stock exchanges such as the NYSE. Others trade on OTC Markets exchanges, like the Pink Sheets.
Some popular Swedish ADRs include:
- Ericsson (NASDAQ: ERIC)
- AB Volvo (Pink Sheets: VOLVY)
- Atlas Copco AB (Pink Sheets: ATLKY)
Benefits and Risks of Investing in Sweden
Sweden offers investors a robust modern economy that has survived many economic downturns since the 1990s. Despite this strong showing, there are many risks that global investors should be aware of before putting their money into Sweden.
Benefits of investing in Sweden include:
- Strong Capitalist Economy. Sweden has a highly competitive economy that houses many multinational firms in a diverse set of sectors.
- Low Risk of a Debt Crisis. Sweden's debt-to-GDP ratio remains very low, with the government running surpluses from 2015 to 2019.
Risks of investing in Sweden include:
- Unionized Workforces. As of 2018, around 65% of Sweden's workforce was unionized, which could pose problems for some popular ADRs.
- Extensive Welfare Benefits. Sweden is well known for providing extensive welfare benefits. That has worked so far, but it may pose a problem with slower GDP growth.