Far from being an elitist club, market trading is open to everyone in one form or another. Just because you are somebody who is average, has little knowledge of how trading works or have a small bank account doesn’t mean you’re excluded. In fact, this is a common myth that carries on throughout our culture as we see the markets as something that only the rich and ‘in the know’ kind of people are allowed to dabble in. First of all, that’s nonsense, and secondly, if that was the case, the markets would be incredibly smaller than what they are now. The trading industry knows that in order to keep a healthy supply of active involvement, they need to constantly create an apparatus that allows newcomers of all knowledge levels to participate. So rather than be afraid of the endless charts and statistics, taking them in your stride would be the better option.
An index fund is a mutual fund, which means a number of investors pool their money into one fund and it’s controlled by a firm who will invest the funds. Depending on the number of other investors, the share i.e. the risk involved in the fund can be low or high. Firms that invest in indexes are profoundly safer than those that invest in individual stocks. Indexes are a grouping of companies that have a similar value. For example, companies that are the most successful in the UK will be in the FTSE 100 index and in America the equivalent to this index would be the Fortune 100. Spreading out the mutual fund among many different companies, from every industry imaginable is a safe bet. If one industry begins to decline such as the toy or kid’s entertainment industry, but the car industry sees a boom, you level out your loss with a gain. It’s a seesaw effect that means although your profit may take time to accumulate, it will almost certainly guarantee you a net gain. Index fund firms welcome one and all, as long as you have the capital and the patience.
Sensing a change
Have you ever watched a financial report and said to yourself that you saw the change coming? If you are closely involved in an industry and or watch the markets carefully out of interest, spread betting could your way in. Not having to pay capital gains tax and being able to trade on a margin are just some of the advantages that spread betting offers. There are also a number of risk management tools you can use to assess whatever market you are betting in. The most common is currency pairs, whereby you bet on the base currency i.e. your strong or favored currency against the counter currency, i.e. the one you believe will decline in value sometime in the near future. If an economy is not seeing growth or something out of anyone’s control occurs such as a natural disaster, this can affect the value of said currency. It’s a broad bet, which is why you stand a chance of making a healthy profit depending on how many points you buy in with.
No way in this day and age should the average person be afraid to get involved financially with a market. Be cautious but be pragmatic enough to do your research and use your knowledge to make an accurate investment.