WHAT IS AN INDEX FUND?
Index funds follows the index on the stock exchange. This is a solution offered by Noon Invest giving you a better return on investment - at a lower cost.
They may follow a stock index (OBX for instance), an asset class (for example government bonds), a market segment, such as bonds due in less than five years, a region or a sector. Index funds are referred to as "passive" investments, as they attempt to follow the results of an index or investment mix, contrary to "active" assets trying to beat the index.
Index fund are known as "open-ended" investments/funds contrary to "closed-ended". This means that when it is invested in the fund, new stocks (units) are issued. When money is pulled back units are redeemed.
“While the banks charge a lot for funds that don’t beat their index, I don’t see why you should not use a cheaper fund, following the index, providing better returns at a lower cost.”
Tobias Aardal, Customer Manager
An index fund follows the development the market, such as Oslo Stock Exchange (OBX). The costs of an index fund may be as little as 0,1 percent per year, compared to a standard fee of 1,5 to 2 percent for actively managed funds.
Investments in index funds makes it easier to diversify your portfolio. For example, buying S&P500 may be compared to buying a small part of each of the 500 companies in the index - at a much lower cost than what would be possible for an individual, given the provisions that is charged per trade. In the same fashion, a typical index fund for corporate property would contain more than 200 individual obligations, that way the standard risk will be very diversified.
THE KEY ADVANTAGES
The main advantages of investing in index funds are the low price and transparency.
The advantages of investing in stock listed index funds are that they make it easier to diversify your portfolio, which reduces risk, they are transparent and the fees are lower than regular funds- which find it difficult to beat the market index over time.
Create your own personalised portfolio with index funds here.