An index fund is an issue of indexed securities that are listed on the stock exchange by analogy with stocks and characterize the behavior of a certain specific area of the market. Indices are issued in the form of ETFs. This investment method is relatively new, but has gained great popularity due to the minimization of risks and strict margin requirements.
Instructions
Step 1
Explore the pros and cons of ETF indices. This will allow you to get an overview of the trading process and highlight the dangerous points. The advantage of this investment method is the low cost share, i.e. the percentage of assets that is spent on maintaining the fund. Trading is carried out according to a passive investment strategy, so there is no need to spend on a manager. The index market is liquid and transparent and is also used for various investment purposes.
Step 2
Pay attention to the main disadvantages of trading on index exchanges. Due to passive trading, ETFs are not adapted to changing market conditions, which can sometimes be fatal. Also, in some cases, trading can be carried out below or above the net asset value, which leads to the receipt of the amount of losses or premiums.
Step 3
Determine which index fund you want to invest your money in. To do this, it is necessary to analyze the index market according to a number of criteria. Pay attention to the net asset value, which determines the size of the fund. Find out the amount of the management company commission and the amount of trading expenses. Determine the asset structure of the funds that should follow the structure of the index.
Step 4
Choose a management company or brokerage office that allows you to trade on index funds. Find out how to withdraw and deposit funds into your account, as well as how to invest in indices. Based on these criteria, identify an intermediary and sign the appropriate agreement with him.
Step 5
Analyze the index market and determine the investment goals and the timing of the profit. Based on this, develop your own trading strategy. Study the literature on this topic and consult with your broker before making your first investment.
