An ETF is an exchange-traded fund: you buy one of its units, and the fund uses the money to hold dozens or hundreds of securities. An index fund copies the make-up of an index such as the S&P 500, so one unit gives you a share in the 500 largest US companies at once for a minimal fee. Since 11 August 2026 Ukrainians can buy foreign securities through Ukrainian financial institutions within a monthly limit of UAH 200,000, and pay 18% personal income tax and 5% military levy on the profit from selling them.
Andrii Kolisnyk
9 min read
A stock market index is a list of companies put together by clear rules, plus a number that shows how their combined value changes. The S&P 500 includes 500 large US companies, and the bigger the company, the bigger its weight in the index. That is why people often speak of the S&P 500 as "the US stock market as a whole".
You cannot buy the index itself; it is only a calculation. What you buy is a fund that holds the same shares in the same proportions. Such a fund is called an index fund: the manager does not pick the "best" shares but simply copies the index. This gives two main advantages:
An ETF (exchange-traded fund) is a fund whose units trade on an exchange like shares. The price is visible during the day, and you can buy or sell through a broker at any time during trading. Most ETFs are index funds, but there are also active, sector and leveraged ones, so "ETF" does not automatically mean "index fund".
| Type of fund | How to buy and sell | What to know |
|---|---|---|
| Index ETF | On an exchange through a broker, at the current price | Copies an index, lowest costs, price changes during the day |
| Active fund | Through the management company or on an exchange | The manager tries to beat the market, costs are higher, and most such funds trail the index over the long term |
| Ukrainian collective investment fund (unit or corporate fund) | Through an asset management company | Regulated by the NSSMC, invests mainly in Ukrainian assets; index funds on foreign indices are practically absent among them |
Before buying any ETF, check three things in the fund's description: which index it tracks, what its annual costs are (expense ratio or TER) and whether it pays out dividends or reinvests them. Leveraged and "inverse" funds, which earn when prices fall, are not suitable for long-term investing: they are designed for short trades and lose value over time even when the index stands still.
S&P Dow Jones Indices counts every six months how many active funds beat their index. According to the SPIVA report as of the end of 2024, 89.5% of funds investing in large US companies trailed the S&P 500 over 15 years, and 91.99% over 20 years. In other words, picking one of the few winners in advance is very hard, while paying for the attempt is guaranteed.
The main reason is fees. A fund's annual charge is taken every year from the whole amount, whatever the result, and over the long term it eats a noticeable part of the profit through the effect of compound interest:
Over 20 years, the difference between a fund charging 0.1% and one charging 2% a year is more than UAH 136,000 for every UAH 100,000 invested. So among funds tracking the same index, the most sensible choice is usually the largest and cheapest in terms of costs. You can work out your own case with regular contributions in the compound interest calculator, entering the return after fees.
Why returns should be compared with inflation rather than with zero is explained in the article on real return.
Since 11 August 2026 the NBU has allowed individuals, within a monthly limit of UAH 200,000, to buy not only currency but also non-cash bank metals and securities of foreign issuers held in Ukraine's depository system. The limit counts all these operations together within one bank. Such securities can be bought through a bank or an investment firm licensed by the NSSMC that offers access to foreign securities.
Securities bought this way are held in the Ukrainian depository system. Since 1 January 2025 the NSSMC has banned removing foreign issuers' securities from this system for the duration of martial law, except in certain technical cases. So you cannot transfer the funds you bought to a foreign broker: you will have to sell them where you bought them.
Before opening an account, find out:
Foreign brokers offer the widest choice of funds, but the NSSMC does not regulate them, and protection of your money depends on the rules of the broker's country. Funding such an account from Ukraine during martial law is difficult: the NBU allows currency to be sent abroad only in specified cases, so before opening an account check with your bank whether such a transfer is possible in your case. Fraudsters often pose as foreign brokers, so check the licence following the guide in the article on how to check a broker.
Funds tracking the same index come in two kinds. Distributing funds pay the companies' dividends out to your account. Accumulating funds reinvest them inside the fund, so the unit price grows faster.
In Ukraine this affects taxes as follows:
In terms of the amount of tax the difference is smaller than it seems: dividends are taxed at a lower rate, which almost makes up for paying it every year. The main advantage of an accumulating fund lies elsewhere: you do not have to declare small dividends every year, collect certificates to credit foreign tax or reinvest payouts by hand. For long-term investing with small sums this is noticeably simpler.
| Income | Tax | Who pays |
|---|---|---|
| Profit from selling units | 18% personal income tax and 5% military levy on the difference between the sale price and the purchase costs | A Ukrainian broker withholds it as a tax agent; with a foreign broker you declare it yourself |
| Dividends from a foreign fund | 9% personal income tax and 5% military levy | You, in the annual return, if a tax agent has not withheld it |
| Exchange rate difference | Part of the investment profit, because purchase and sale prices are converted into hryvnias at the NBU rate on the date of each transaction | Together with the profit from the sale |
Profits and losses for the year across all securities transactions can be netted. The return is filed by 1 May of the following year, and the tax is paid by 1 August. A step by step example with exchange rates and how to avoid paying tax twice is in the article on taxes on trading shares.
The simplest and most robust strategy for an index fund is to buy the same amount every month, regardless of the news and the price. When the market falls, the same amount buys you more units; when it rises, fewer. This approach is called cost averaging, and it removes the main beginner's mistake: buying at the peak out of euphoria and selling at the bottom out of fear. The NBU's monthly limit on buying foreign securities usually does not get in the way of this strategy.
Before you start, make sure you have an emergency fund and no expensive loans. How to prepare and where to begin is described in the article on how to start investing.
Checked against official sources on October 29, 2026. If a figure changes, we update the article and the «Updated» date changes automatically.
This article is for information only and is not investment advice or a recommendation to buy any specific security. The value of funds can fall, and past returns do not guarantee future ones. Returns in the examples are illustrative.
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A beginner's plan: emergency fund, government bonds from UAH 1,000, stocks and funds, taxes, checking a broker and what UAH 1,000 a month becomes over 10 and 20 years.
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The real return formula, a table for cash, deposits and government bonds on current figures, the break-even rate and what happens with foreign currency.