How to invest in CAC 40 index funds in 2023
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82% of retail CFD accounts lose money.
It only takes a few minutes to invest in the CAC 40 index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard CAC 40 ETF through an online trading platform.
Where can I invest in the CAC 40 index?Copy link to section
Both CAC 40 ETFs and CAC 40 CFDs are available to invest in through eToro .
Here are three more places to buy the CAC 40, ranked according to their cost, security, and features.
77% of retail CFD accounts lose money.
How do I invest in the PX1 index?Copy link to section
The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an CAC 40 ETF or CFD. This guide explains how to do it:
Step 1. Sign up to eToroCopy link to section
We recommend using eToro to invest in CAC 40. Sign up for a brokerage account and deposit some money. You may need to supply a form of photo ID to verify the account.
77% of retail CFD accounts lose money.
Step 2. Decide how to buy CAC 40Copy link to section
This boils down to choosing between an CAC 40 ETF or CFD. ETFs are generally better suited to investors who want to passively track the CAC 40’s performance. CFDs offer a greater range of trading options: you can use leverage, short the index, or buy and sell it outside of trading hours.
Step 3. Invest in the CAC 40Copy link to section
Sign into your trading account and search for the CAC 40. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.
Step 4. Monitor your investmentCopy link to section
When you buy a CFD, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.
Your trading account will show the price change in the CAC 40 since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the CAC 40 and close your position, ideally at a profit!
The different ways to invest in the PX1Copy link to section
As we mentioned above, there are numerous ways to put your money into the CAC 40. ETFs and CFDs are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.
CAC 40 ETFsCopy link to section
An ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.
An CAC 40 ETF is one way of investing in the CAC 40. It’s simply an investment fund that mirrors the performance of the CAC 40. When you buy shares in the fund, the value of your investment will rise or fall with the CAC 40 itself.
ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the CAC 40 index, because you can buy or sell shares in the fund throughout the day.
Examples of popular PX1 ETFs
- Xtrackers CAC 40 UCITS ETF (DX2G)
- Lyxor CAC 40 UCITS ETF (CACX)
- AMUNDI CAC 40 ESG UCITS ETF (C40)
CAC 40 index fundsCopy link to section
An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the CAC 40. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.
However, there are a couple of differences. CAC 40 index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in CAC 40 index funds.
That means an CAC 40 mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.
Examples of popular PX1 index funds/mutual funds
- AXA Rosenberg France Equity Alpha Fund
- Amundi Actions France
- BNP Paribas Actions France
CAC 40 CFDsCopy link to section
CFDs (contracts for difference) are a way to speculate on CAC 40 price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the CAC 40 – but it’s separate from it.
As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.
All of this means CAC 40 CFDs offer the potential to outperform a fund that passively tracks the CAC 40’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.
CAC 40 futuresCopy link to section
Futures contracts are agreements to buy or sell the PX1 at an agreed price on a set date in the future. CAC 40 futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.
Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.
Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the CAC 40 then you might want to short the CAC 40 so that you still make some money if the price falls.
CAC 40 stocksCopy link to section
Another way to invest in the CAC 40 is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the CAC 40 in order to get broad exposure to its performance.
The most heavily weighted stocks in the CAC 40 tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.
One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.
For the CAC 40 index, the largest stocks you might choose to invest in are:
|LVMH Moet Hennessy Louis Vuitton SE (MC)||9.97%|
|TotalEnergies SE (FP)||9.22%|
|Sanofi SA (SAN)||7.31%|
|L’Oreal SA (OR)||6.65%|
|Vinci SA (DG)||5.28%|
|Airbus SE (AIR)||4.87%|
|Safran SA (SAF)||3.98%|
|Schneider Electric SE (SU)||3.70%|
|Danone SA (BN)||3.60%|
|BNP Paribas SA (BNP)||3.58%|
The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.
How much does it cost to invest in the CAC 40 index?Copy link to section
From $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD, or share, plus the fees associated with it.
|Instrument||Trading fee||Management fee|
|Exchange traded funds||$0-$5.99||0-0.2%|
|Index fund / mutual fund||$0-$5.99||0.1-2%|
*A fee comparison of 3 leading brokers for example purposes
ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.
All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars.
Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.
Should I invest in the CAC 40 index?Copy link to section
Yes, CAC 40 investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It gives you an instantly diverse portfolio with exposure to a broad area of the stock market.
The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The CAC 40 is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.
What are the advantages of investing in the CAC 40 index?Copy link to section
An index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the CAC 40 index:
- Get access to the top companies in France. The CAC 40 index includes the biggest companies listed in France. Many of these businesses are globally recognisable brands such as TotalEnergies, L’Oreal, and Louis Vuitton.
- Diversification. The CAC 40 index provides exposure to a diversified portfolio of 40 large-cap companies across various sectors, which can help reduce portfolio risk and volatility.
- Liquidity. The CAC 40 is one of Europe’s most traded indexes, which means it has high liquidity. This makes it easy for you to buy and sell quickly at competitive prices.
- Market Performance. The CAC 40 index has historically performed well over the long term, allowing investors to benefit from the growth of some of France’s largest and most successful companies.
- Cost-effective investing. Investing in CAC 40 ETFs or funds can be a cost-effective way to gain exposure to the French stock market, as index funds and ETFs tracking the index tend to have low fees and expenses.
What are the disadvantages of investing in the CAC 40 index?Copy link to section
The main risk of investing in the CAC 40 is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of CAC 40 investing.
- The CAC 40 is composed of a limited number of companies. Since the CAC 40 index comprises only 40 companies, investors may face concentration risk if a large percentage of their portfolio is invested in a single sector or company.
- There is a risk of global markets impacting France. Investing in the CAC 40 means exposure to the French economy and market, which local and international political and economic events can impact.
- Lack of Customisation. As an index fund or ETF investor, you cannot customise your portfolio or make strategic investment decisions, as you passively invest in the stocks that make up the index.
FAQsCopy link to section
An ETF is a better option if you want to be able to buy and sell shares in the CAC 40 throughout the day. An index fund is better suited to long term investors with a larger initial sum to invest.
An ETF is the best way for a beginner to invest in the CAC 40 index. It’s easy to buy shares in an ETF and the costs are relatively low. You only have to pay the trading fees and a small annual management fee.
Yes, if you choose the right online broker. Not all brokers offer index investing, so make sure to find a broker that offers the CAC 40 index before you sign up.
The CAC 40 itself does not pay dividends, but many companies listed on it do. If you invest in an CAC 40 index fund or ETF then you will receive a percentage of the dividends paid out by those companies, based on the number of shares you own in the fund.
The Lyxor CAC 40 UCITS ETF (CACX) is the best CAC 40 fund. It is also the best performing, cheapest, and largest.
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