How to invest in the BEL 20 Index
Investing in the Belgian economy via the BEL 20 Index could be the way to go. There are numerous ways to invest in the BEL 20 Index, and we’re here to guide you through all your investment choices, and every other step of the process.
What is the BEL 20 Index?
Founded in 1990, the BEL 20 Index is the benchmark stock market index for Euronext Brussels. It consists of 20 of Belgium’s most prominent stocks, hailing from a number of different industries, and is one of the key indices for tracking the pan-European Euronext index.
Is it a good investment?
It can be, depending on your specific investment goals. The BEL 20 Index offers an alternative to larger stock indices such as the S&P 500 and FTSE 100, while still containing a variety of reliable blue-chip stocks. By investing in an index of 20 of Belgium’s most prominent stocks, you hold a far more diversified portfolio than if you only bought one or two individual stocks.
Still, every investment comes with some amount of risk. Stock indices tend to fall during bear markets, and so investing at the wrong time can lead to losses. Make sure to analyse the market to ensure conditions are looking bullish before you consider investing in the BEL 20 Index.
How do I invest in the BEL 20 Index?
While you can’t buy shares directly in an index, there are a variety of ways to grow your capital in line with the BEL 20’s performance. Here are three important steps to consider before investing in the BEL 20 Index:
- Choose an investment type
- Choose a platform
- Use our top tips to succeed
1. Choose investment type
There are many different methods you can use to invest in the BEL 20 Index. You’ll want to be selective when deciding which one to pick, with key factors such as transaction fees, customer service, and user-friendliness all things to consider. Here are the most popular options:
An ETF (exchange-traded fund) is an investment fund that can be traded on a stock exchange. ETFs behave like stocks, trading during regular stock market hours, with a bid and ask price and near-instant order execution. They can hold different assets, such as individual stocks, bonds, or commodities, or in this case serve as a proxy for the BEL 20 Index. An BEL 20 Index ETF can be an effective, low-fee way to invest your money in the Belgian economy. It is worth noting, however, that while you benefit from diversification when you buy a BEL 20 Index ETF, you also get stuck holding both the best- and worst-performing stocks within the index.
This method of investing is a good idea if you want the diversification of the BEL 20 Index, with low fees and an asset that’s quick and easy to trade, but if you want a more customisable investment method you might want to try the next in the list.
Another way to invest in the BEL 20 Index is to use an online broker to buy shares of all 20 stocks that the index tracks. This way, you can decide which stocks you want to keep longer-term, and which ones you want to sell – something you can’t do if you invest in the index as a whole. The downside is that making 20 separate transactions to buy each stock (let alone the additional trades you’ll have to make when you sell any of them) will lead to hefty transaction fees.
This method of investing makes sense for you if you want to try out all 20 stocks tracked by the BEL 20 index, then scale down until you have a smaller number of top performers. The transaction fees associated with this strategy can be off putting, but as the BEL 20 tracks a small number of stocks this is a more viable strategy than it would be with larger indices such as the S&P 500.
A mutual fund is a professionally-managed investment fund that pools money from many different people to invest in different assets, such as the BEL 20 Index. Mutual funds and ETFs both enable you to invest in the entire index at once. But unlike ETFs, mutual funds must be bought through a broker or directly from the company that administers the fund. Also, mutual funds charge higher fees than ETFs do. Finally, mutual funds can only be traded after market close, whereas ETFs can be traded any time during regular market trading hours.
A BEL 20 Index mutual fund (also known as an index fund) thus makes the most sense for investors who want to buy and hold for a longer period of time, since it’s more expensive to trade than an ETF.
2. Choose where to invest in the BEL 20 Index
Once you have decided how you want to invest in the BEL 20 Index, you’ll need to find a service that will execute your trade. Here are some of the most popular options:
- Brokers & trading platforms. Brokers and other online trading platforms offer easy-to-use tools that enable you to invest in the BEL 20 Index. Online brokers also offer low transaction fees, making them attractive for all investors – especially higher-frequency traders. On the downside, online brokers tend not to offer much investment advice, so if you’re looking for more active help then you’ll want to consider other investing options.
- Robo advisors. Robo advisors rely on algorithms to execute trades, and come with affordable transaction fees. Many robo advisors will also allow you to discuss your investment strategy with an advisor to help you hone your investing plans. That makes a robo advisor an effective hybrid approach, but still one that’s more hands-off than investing through a licensed financial advisor.
- Financial advisors. Investing with a financial advisor is the most interactive way to buy into the BEL 20 Index. Financial advisors will thoroughly go over your options for investing in the BEL 20 Index, which less experienced investors might appreciate. However, this comes at premium prices, and as investing in the BEL 20 Index is a fairly simple process it might not be worth the expensive fees that financial advisors charge when investing in the BEL 20.
- Banks. You can invest in an index such as the BEL 20 through your bank. That way, you gain the convenience of having all of your financial instruments with one institution. The problem is that banks tend to charge high fees but not offer much to justify them. Your banks won’t offer the high level of advice that a good financial advisor will give you, so if you want to save your money and get better service, it’s usually best to look elsewhere.
3. Use our top tips to be a successful investor
Before you invest in the BEL 20 Index (or any stock index), you should review these tips:
- Do your research. Go over the pros and cons of investing in the BEL 20 Index before putting in your hard-earned money. Constructing a sound investment plan ahead of time will improve your chances of success, and help you avoid judgment-damaging emotions such as fear and greed which can lead you to make rash decisions if you’re unprepared.
- Set a budget. Set a budget that suits your financial and emotional tolerance for risk. If you invest more than you can afford to lose, you could incur losses so large that it destroys both your confidence and your ability to afford to make future trades.
- Select the right platform. We’ve already highlighted the different trading platforms you can use to invest in the BEL 20 Index. Choose the method that works best for your investing needs, given the balance of transaction fees and level of service you’re looking for.
- Grow your investments gradually. For beginner investors, start slow by investing a smaller amount of money in a BEL 20 Index investment. You can always invest bigger dollar amounts as you gain more experience and expertise.
- Think long-term. Investing in index funds can be an effective long-term strategy, where your goal is to collect big gains during a long-running bull market. Positive market conditions are vital for this, so ensure to keep an eye on how the wider market is performing before investing in an index such as the BEL 20.
Here’s a list of our top 3 recommended brokers to invest in indices ETFs:
What should I do now?
If you’re ready to go, simply head over to your chosen platform’s website, key in the ticker symbol of the investment asset you’re buying, then click Buy. You’re now invested in the performance of the BEL 20 Index!
Try some of our investment courses for beginners
Still not feeling ready to invest in the BEL 20 Index? That’s only natural. Check out more of our easy-to-understand, easy-to-follow educational courses and news updates, right here.