Advantages of Trading Index Securities:
- Less Capital Investment: You won’t need to purchase a mutual fund or an assemblage of stocks to get the performance of an index. You can buy the index directly and as easily as a stock, with low commissions, and no need to worry about load!
- Less Volatility: By their nature the indexes are much less volatile than the stocks they represent, as they are an ‘average’ of many stocks. Therefore one doesn’t need to worry about the news and fluctuations of many individual stocks.
- Many Derivatives: When trading an index, you not only get the ability to trade index shares ( SPDRs, QQQQ, Diamonds) but you can also trade index options and index futures. Index options and futures carry far more risk, and of course more gain, but are not as volatile as an individual stock.
Index Share Highlights:
- An entire portfolio of stocks in a single transaction
- Long-term investments
- Buying or selling throughout the trading day
- Lower costs for investor affordability
- Margin eligibility
- Opportunity for dividends
- Tax efficiencies
- Ease and convenience
- Simplify market timing