Why learn about index funds to start investing

Entering the world of investment is not an easy task, but today there are many tools that can help us. Knowing about index funds can be a good start.

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Savings by Spanish families were higher last year. In the third quarter of 2020, the savings rate was 15.1%, according to data provided by the National Institute of Statistics. The restrictions and spending more time at home have contributed to this saving, but also the situation of uncertainty due to the coronavirus crisis has led Spaniards to decide to be cautious and have money saved for what may happen.

However, it must be borne in mind that the money saved loses its value if it is not invested. Inflation causes purchasing power to decline over time. Thus, one of the options to manage our finances is to combine saving with investment.

Today there are numerous tools that can help you enter the world of investing and that they will make life easier. Investing in stocks, bonds or mutual funds is now easier and more accessible. From the financial comparator HelpMyCash.com, index funds stand out, a passive management product that has low commissions, as well as the advantages offered by hiring them through a robo advisor service. This service configures a customized investment portfolio, to avoid having to choose between hundreds and hundreds of products.

Index funds to save on fees

The bank may have offered us an investment fund on numerous occasions. These funds are probably actively managed and have high commissions due to the work carried out by the financial institution. In addition to the investment funds with active management, there are also those with passive management And that’s where index funds come in. Its great advantage? They have lower commissions as they require less intervention from the manager.

Index funds are those that try to replicate a stock indexl (S&P 500, IBEX 35, etc.) instead of outperforming it, while actively managed mutual funds seek to outperform indices. Typically this makes management less active and commissions lower.

The options for contracting an index fund are numerous, including banks, although it may not be the cheapest choice. There are other options that give the possibility of saving more in commissions. And, on the other hand, with a bank you must have sufficient knowledge to choose an index fund among those that are available to us. It can be a good choice if you know the specific fund you want to hire.

The experts of the financial comparator HelpMyCash.com highlight, among the alternatives to traditional banks, the ‘robo advisor’ services, where, through an online tool, they will present the configuration of an investment portfolio with more s from an index fund. In an easy way and with a low minimum investment we can start to make the money profitable.

What is a ‘robo advisor’ and why can it be useful?

The robo advisor service offered by some financial institutions refers to an automated management of the investment. A committee of experts configures an algorithm so that this investment is regulated automatically, which allows lower commissions and avoid the emotional impulses that a human manager can experience.

In addition, a robo advisor helps set up a diversified investment portfolio that combines multiple products, without having to choose between hundreds and hundreds of products, tailored to your goals and risk tolerance. As explained from HelpMyCash.com, to start an investment in a robo advisor we will answer a short questionnaire, with about seven questions, about our current financial situation and our objectives. At the end of this test, we will have the configuration of an investment portfolio that adapts to our profile.

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