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How To Buy and Sell Tracker Funds

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  • Posted date:
  • 05-08-2019
How To Buy and Sell Tracker Funds

Tracker funds and exchange-traded funds are investments meant to enhance the overall performance of a market index.

In most cases, the market index tends to follow the entire performance of a group of investments. For instance, FTSE 100 is one of the market index examples; it comprises of one hundred companies with the highest value on the stock exchange market in London. An easy way to monitor a market is to purchase most of the securities in the targeted market in the percentages they signify in the index.

For instance, if your market is made up of five securities with different proportions lets say 25%, 22%, 20%, 18%, 15%, the funds will be invested like this:

Significant global equity, as well as bond markets, have hundreds of securities, and in some extreme cases, they can be made up of thousands of shares and bonds as well.

CompanyFunds Invested (%)

Circumstances when the tracker or ETF might be appropriate for you?

Exchange Trade Funds, as well as tracker funds; are passive investments that are meant to track the changes in an index. Exchange Trade Funds may be perfect for individuals looking for affordable ways to invest in a specific type of investment like bonds, shares or property.

There can be several risks to this which may not guarantee you the success you require. That is why most investors opt to spread the risks by investing in a variety of shares and bonds.

Safe and Secure

Investing in securities means that funds are kept safe on behalf of the investor. If the firm is declared bankrupt, any assets are safeguarded. You still retain the ownership of the investment, and the fund assets remain invested as before. If the fund manager invests your money in something different than agreed, the firm will be liable when it comes to compensating the investors.

It could be possible for the firm to become out of business or be declared bankrupt, and therefore not in a position to pay back your money. In this case, the Financial Services Compensation Scheme would pay the compensation for a maximum of £50,000 per head, if the failure occurred after the beginning of 2010, but before the end of March 2019. You are only eligible for compensation if the firm issued a false statement or advice after 1st April 2019.

You can also claim compensation if the firm offered poor investment management, which has now proven costly to the person or firm exceeding £85,0000. The FSCS does not rely on shares but financial advice as well as the investment firms. The FSCS is not liable for ETFs purchased directly from the firm.

Claiming for compensation tends to be difficult since the actual value of your investment is depreciating. Every investment has its risks. An index tracker will be subject to losses if the index its tracking doesn't show positive results.

Paul Dodd Asset Management Limited is committed to providing independent financial management throughout Leeds and North Yorkshire. If you need to speak to our financial advice specialist today, please get in touch to discuss the ways that we can help you.