What To Consider When I’m Buying An Index Funds

There are couple of things which you need to consider before you actually buy an index fund. These things are five things which are Convenience, Fund selection, Impact investing, Commission-free options and Trading costs.

Convenience

This first one is about finding a single provider who can accommodate all your need in an index funds.

A good example in this will be, if you would be just interesting in going to invest in mutual funds. A mutual fund company may be able to serve as your investment platform into that specific mutual fund you want. However if you would be require sophisticated stock research and screening tools, a discount broker that also sells the index funds you want may be better.

Fund selection

This one is the second thing to consider before you buy an index fund. This one is more about the question of “Do you want to buy index funds from various fund places?”

Before you buy mutual funds or index funds from big mutual fund companies, you need to know that these big mutual fund companies carry couple of their competitors’ funds, but the selection may be more limited than what’s available in a discount broker’s lineup.

Impact investing

The third thing is about another question which this time is more about “Want your investment to make a difference outside your portfolio?”.

You need to keep in mind that some index funds do track benchmarks that target companies with more women in leadership positions, global companies in the clean energy universe or high ESG. (ESG stands for environmental, social and governance.)

Commission-free options.

This one is also about a question to consider. And this question is all about “Do they offer no-transaction-fee mutual funds or commission-free ETFs?”.

This point for the most part is an important criterion we use to rate discount brokers.

Trading costs

And this last point is about the fact about the “If the commission or transaction fee isn’t waived, consider how much a broker or fund company charges to buy or sell the index fund.”

As I mentioned in previous posts, mutual funds have commissions which are higher than stock trading ones so it would be good if you would keep that in mind as well.

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