Benefits of investing in index-based investments
Index-based investments can be sound long term investments, are easy to trade and require only a small amount of money to get started.
Risks and benefits of index-based investments
Investing in index-based investments can be a simple way to build wealth in one simple transaction. Like any investment, there is a risk and reward relationship to consider
Index-based investments can be sound long term investments, are easy to trade and require only a small amount of money to get started.
In one simple transaction, index-based investments provide exposure across the market represented by the chosen index. Many investors like the ‘off the shelf’ aspect of index-based investments because they remove the need to select individual securities. A diversified portoflio across a range of asset classes, such as Australian shares, international shares, listed property and bonds can be compiled in a relatively short period of time in a few easy transactions.
A risk and reward relationship exists with any type of investment. To receive a return on money invested you need to be prepared to place that money 'at risk'. Generally the greater the risk associated with an investment the greater the rate of return investors will expect.
Asset prices can rise and fall rapidly and investors must accept the fact that the value of their index based investment may fluctuate by as much as 50% or more in a year. General market risk can relate to a particular sector. For example, mining sector indices are usually more volatile than industrial sector indices.