How to invest in the Ibovespa Index
We’ll detail all the different ways you can invest in the Ibovespa Index, along with the pros and cons of each investment method. That way you can make informed decisions on how best to invest your money.
What is the Ibovespa Index?
The Indice Bovespa (more commonly referred to as the Ibovespa) is Brazil’s benchmark stock market index. The Ibovespa Index consists of 60 leading stocks traded on Brazil’s B3 (Brasil Bolsa Balcão) stock exchange. Brazil’s economy is one of the fastest-growing in the world, and the Ibovespa Index rose 31.6% across the course of 2019.
Is Ibovespa a good investment?
It can be, depending on your personal investment goals. Brazil’s economy has grown fast in recent years, and as one of the so-called BRIC (Brazil/Russia/India/China) economies it remains a large and formidable global player. By investing in the Ibovespa Index you gain access to 60 stocks from a variety of different industries, so you gain the benefit of portfolio diversification to protect you against fluctuations in a limited number of stocks.
As with any index, the biggest risk factor is the overall condition of financial markets. A bull market is a ripe environment for big gains, while a bear market lends itself to big losses for investors and indices plummet.
How do I invest in the Ibovespa Index?
Here are three steps you should take when investing in the Ibovespa Index:
- Choose an investment type
- Use our top tips to succeed
- Choose a platform to invest with
1. Choose an investment type
There are lots of ways to invest in the Ibovespa Index. Still, too many choices can seem intimidating sometimes, especially for beginner investors. To find the best strategy for you amid all of those choices, consider factors such as the relative size of transaction fees for each approach, as well as the level of customer service that you want when investing. Here are some of the most popular ways to invest in the Ibovespa Index:
An ETF (exchange-traded fund) is an investment fund that can be traded on a stock exchange, in a manner similar to an individual stock. You can trade ETFs any time during regular stock market hours, giving flexibility as well as diversification. Ibovespa ETFs include numerous different assets at once, such as bonds, commodities and precious metals, or all the stocks included in an index such as the Ibovespa. An ETF can be a smart way to invest in the Ibovespa Index, since you’re investing in a diversified portfolio of 60 blue-chip stocks without paying high fees. Just avoid buying stock index ETFs during a bear market.
On the flipside, keep in mind that when you buy a large batch of stocks such as the 60-stock Ibovespa Index, you’re holding both the best- and worst-performing stocks within that group. More selective investors might opt for the next investment method on our list instead.
If you want to focus on the top-performing stocks in the Ibovespa Index rather than being wedded to the entire index, you can use separate trades to buy shares of the 60 individual stocks that the index tracks instead. This allows you to evaluate each stock as you go, then whittle down your holdings until you own only the top-performing Ibovespa Index stocks.
The problem with buying 60 individual stocks is that you must make 60 separate trades to buy each one (plus even more trades when you sell the ones you decide not to keep holding). This approach leads to large transaction fees and lots of time spent trading. Beginner investors with smaller budgets and less time on their hands might want to try a different tack.
A mutual fund is an investment fund run by a professional money manager that collects capital from many different investors, then invests that pooled money into different assets. Ibovespa fund (also known as an index fund) allows you to invest in all 60 of the Ibovespa Index’s stocks at once, which mitigates your risk and allows you to reap the rewards if the Ibovespa rises. A mutual fund is either bought through a broker or directly from the company that administers the Ibovespa fund.
Keep in mind that mutual funds can only be bought at the end of the stock market’s trading day, not during regular stock market trading hours like the Ibovespa ETF. Also, mutual funds charge higher fees than ETFs do. So if you’re going to invest in an Ibovespa Index mutual fund, it’s best to do so if you’re planning on holding your investment for the long term.
2. Use our top tips to be a successful investor
Before you invest in the Ibovespa Index, review these top investment tips. Keeping these in mind will help you become a better investor over time.
- Do your research. Investing takes time, hard work, and patience to do well. If you’re considering an investment in the Ibovespa Index, take the time to consider all the pros and cons of that investment. Build a smart investment plan, so you can improve your chances of success. The more prepared you are, the better able you’ll be to keep your cool, even when the stock market becomes volatile and unpredictable.
- Set a budget. The budget you set should account for your personal level of risk tolerance, as well as how much money you can afford to lose. If you let your losses pile up, you could hurt your confidence and also make it difficult to find the capital for future trades.
- Select the right platform. One investor might choose a platform based entirely on the size of its transaction fees, while another might focus a lot more on the quantity and quality of investment advice they can get. So it’s important to know exactly what your investment goals are before you even start your search.
- Grow your investments gradually. As a beginner investor, you can start by investing a smaller amount of money. You can always invest more as you gain experience and increase your capital through making wise decisions. That gradual progression will help prevent big losses, and allow you to maximise your gains over time.
- Think long-term. To succeed long-term, you can buy and hold the Ibovespa Index, aiming for bigger gains. If you’re planning on holding for a long time, though, research the market to ensure the Brazilian economy is looking bullish. Bear markets will cause indices like the Ibovespa to tumble.
3. Choose a platform to invest with
If you want to invest in the Ibovespa Index, you need to decide where you want to put your money to make that happen. Here are some of the best options available for you:
- Brokers & trading platforms. Brokers offer many different online tools that allow you to invest in the Ibovespa Index quickly, easily, and inexpensively. However, online brokers don’t usually offer in-depth investment advice, so if you’re looking for a more personalised service to guide your decisions, there are other options you should consider.
- Robo advisors. Robots & Robo advisors are algorithm-powered trading platforms which execute trades automatically. Although the robo advisor process is meant to be automated, some robo advisors will allow you to discuss your investment strategy with an actual human being to craft a solid plan. Combine that guidance with relatively low trading fees and you have an attractive investing option for many investors. That said, robo advisors are still a more hands-off investing approach than what you get when investing with a dedicated financial advisor.
- Financial advisors. Financial advisors offer the most investment advice to investors, but also come at the highest cost. They’ll discuss your financial goals with you in great detail, and work with you toward meeting those goals. With that level of service, it’s no surprise that financial advisors charge a premium for their services. That can sometimes be worth the price given the high level of customer service they provide, but investing in the Ibovespa Index isn’t overly complicated and as such a financial advisor is probably an expense you can do without.
- Banks. Investing in the Ibovespa Index with your bank gives you the convenience of having all of your financial instruments in one place – such as your checking and savings accounts in addition to your investments. The problem is that banks tend to charge high fees without providing the level of service that top financial advisors offer. That means that banks often don’t offer the combination of service and affordability that’s most desirable. Unless convenience is your top priority, it is unlikely investing through a bank will be your best option.
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 invest in the Ibovespa Index, log into your chosen platform’s website, pick the investment asset you like most as a way to buy into the Ibovespa Index, and buy. After that, track your Ibovespa investment so you can make informed decisions about whether to hold or sell.
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