While growth stocks were trending up during the last year, now the time has come for cyclical stocks to take the lead!
Best index funds to invest in May
2021-04-30 • Updated
Information is not investment advice
Index funds are one of the most favorite traders’ tools as they offer a simple, low-risk, and already diversified way to invest in the stock market. This article will help you to select the best index funds to invest in.
What is an index fund?
A stock index is a benchmark, which measures the performance of several stocks. For example, the well-known S&P 500 includes the 500 largest companies listed on stock exchanges in the United States. By the way, the S&P 500 index is widely viewed as the top gauge of US stocks. There are plenty of other stock indices.
The market crash after the coronavirus outbreak pushed all the stock indices to record lows, but some of them have already managed not only to return to pre-pandemic levels but also outrun them! For example, the most famous S&P 500 index has exceeded pre-pandemic levels by 23% and it isn’t likely to stop its rally up.
If you’re interested in trading individual stocks, you might find useful our article about best-performing stocks.
Best index funds to buy in May 2021
Why trade index funds?
A stock index is an already well-diversified portfolio. Diversification is one of the main pillars of trading stocks. It simply means having a range of various assets to minimize the risks of unexpected price movements of one asset. Therefore, indices are more sustained to unexpected market shocks than individual stocks and thus considered as low-risk investments.
How to invest in index funds?
- Select the index fund or funds you want to trade. If you are a newbie, it’s better to choose well-known and broad market indices at first. Take into consideration an index sector (for example, Nasdaq 100 is a technological index) and its geography (Nikkei 225 - the leading index of Japanese stocks)
- Pay attention that stock indices have their short names: S&P 500 – US 500, Nasdaq 100 – US 100, Nikkei 225 – JP225, etc. You can find them in the full FBS indices list.
- Download the FBS Trader app on your mobile phone to be always able to check the charts and MetaTrader 5 on your personal computer for more complicated tech analysis.
- Open a buy or sell order, depending on your forecast. The good news for FBS traders is that they can trade stocks making both buy and sell trades. Thus, traders have a chance to profit in case of either outcome! If you believe the price has the potential to rise, open a buy order. Otherwise, if you think the price is likely to go down, open a sell order.
- Monitor your trade!
Tip for newbies
For those traders, who have just started, a broad market index is always a good idea as trading just stocks may be too risky. Once you have gained some base knowledge, you can enjoy picking individual stocks too as they generally offer higher yields.
This article was written by and presents the views of our independent financial analysts.
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