How to Buy Index Funds
Index funds are a popular portfolio choice for many investors. There are many different index funds to choose from, so an investor should do some online research to decide which ones to add to a portfolio. The investor will need to decide how many shares of a fund to buy in order to properly diversify the portfolio.
- Investigate different index funds to decide which ones to buy. Pick one of the major funds if you do not want to spread your risk over several sectors. Once you decide which index funds to buy, open an online brokerage account to use for placing trades.
- Choose which broker to use and send in your account deposit. Once your deposit clears you can start buying index funds. Find out if you need to download a trading platform to place trades. You may be able to invest using the broker’s online platform, which you can find on the website.
- Buy the first index fund on your list. Decide how many shares to buy based on your investment goals. If you have several funds in mind, make sure to determine how much to buy for each one before you place any trades. Use an online portfolio allocation tool to help you decide how to spread your risk.
- Review your trade confirmations after you buy different index funds. Find out the exact price that you paid for each fund so you can track your performance. You should be able to see your returns right on the trading platform, or by going to an account management reporting system on the broker’s website.
- Review your index fund holdings on a regular basis. If a particular sector is underperforming the rest of your investment portfolio, decide whether to sell the index fund or to hold it. You should also consider selling an index fund if your outlook for the sector changes.