Index trading is a relatively safe form of trading with the characteristics of comprehensive fund management, and its trading risk is always lower than the risk of investing in individual stocks.
1. Maneuverability is small.
Indexes are the least manipulable financial instruments, and their price fluctuations depend on changes in the stock prices of the constituent companies.
2. Flexible fund management plan.
For trading indexes, you no longer need to put all your eggs in one basket, and diversified investment can effectively reduce trading risks. Trading the Nasdaq 100 Index is equivalent to investing in the top 100 most influential high-tech companies in the United States at the same time. Choosing CAC 40 means investing in the petrochemical industry.
3. Lower risk.
Although the index may also fluctuate due to factors such as geopolitical events, economic forecasts, and natural disasters, in fact, a 10% rise or fall can be regarded as a historic event in the index market and appears in the news headlines.
4. Zero bankruptcy risk.
Unlike individual companies, there is no bankruptcy in the index. If a component company in DAX 30 declares bankruptcy, that position will be replaced by the 31st company in the list of leading German companies. However, if you hold the company’s stock, you will automatically lose this investment.
5. Advantages of the global economic situation.
By investing in a range of companies, you can benefit from the positive or negative dynamics of the global economy. If a company goes bankrupt, the index may still rise.