How to invest in the MERVAL Index

Looking to buy into one of Latin America’s largest stock markets? You should read this.
By: Harry Atkins
Harry Atkins
Harry joined us in 2019, drawing on more than a decade writing, editing and managing high-profile content for blue… read more.
Updated: May 25, 2021
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The MERVAL Index is a great way to get access to a range of South America’s best-performing stocks. We’ll walk you through the many different options to get exposure to the MERVAL Index right here, so you’ll feel inspired and not intimidated by those numerous choices and can make decisions that best fit your goals.

What is the MERVAL Index?

The MERVAL Index is the most widely-used index for tracking the performance of companies listed on the Buenos Aires Stock Exchange. It consists of 13 blue-chip stocks representing finance, telecommunications, metals, and other industries. Argentina’s economic growth has stuttered in recent years compared to some of the leading Latin American economies, and the MERVAL index has seen some volatile years as a result.

Is it a good investment?

The MERVAL Index hasn’t performed up to the standards of many leading stock market indexes around the world lately. So in order for it to work out as a good investment, you would view it as a potential buy-low opportunity. With only 13 stocks in it, the MERVAL is also one of the smallest groupings of stocks found on any major global market index, so you’re not as protected by diversification as you would be with, say, the FTSE 100 or S&P 500.

You should also note that all market indexes risk severe damage when a bear market occurs. So want to put money in an index when market conditions are in your favour.

How do I invest in the MERVAL?

Here are three steps to take as you consider how to get started:

  1. Choose an investment type
  2. Use our top tips to succeed
  3. Choose a platform to invest with

1. Choose investment type

To find the best investment strategy for your own personal investing goals, you should consider multiple factors, such as the relative size of transaction fees for each approach and the level of customer service you’re seeking. Here are some of the most popular methods that investors use:

ETFs

An ETF (exchange-traded fund) is an investment fund that can be traded on a stock exchange during regular stock market hours, in a similar way to individual stocks. ETFs typically include a collection of assets such as bonds or commodities, and can also be used to mirror the performance of an index such as the MERVAL Index. A MERVAL Index ETF gives you access to a diversified batch of stocks, without you needing to pay heavy transaction or management fees.

Individual stocks

If you want to focus on the top-performing stocks in the MERVAL Index, another option is simply to buy some of each of the index’s stocks in separate trade. This allows you to evaluate each stock as you go, then trim your holdings until you own only the index’s top few stocks. 

If you go this route you will end up paying a fair bit in transaction costs. Still, buying 13 stocks and then selling some of those won’t incur anywhere near the transaction costs that buying, say, all 100 FTSE-100 stocks individually would. So if you’re going to deploy this strategy, the MERVAL is the ideal index with which to test it out.

Mutual funds

A mutual fund is an investment fund run by a professional money manager. You can buy a mutual fund through either a broker, or the company that administers the fund. The money manager pools money from many different investors, then invests all of that capital into different assets. A mutual fund (also called an index fund) allows you to invest in all of the MERVAL Index’s stocks in one transaction. 

Mutual funds can only be bought at the end of the stock market’s trading day, not during regular stock market trading hours. This is the primary difference between a mutual fund and an ETF – which can be traded at any time during market opening hours. Another downside to mutual funds is that they charge higher fees than MERVAL Index ETFs do. So if you’re going to use a MERVAL Index fund, consider trying to buy stocks for a longer period of time, since a mutual fund is more difficult and more expensive to trade than MERVAL Index ETF.

2. Use our top tips to be a successful investor

Before you start investing, check out Invezz’s top tips to help you:

  • Do your research. Review all the pros and cons of the MERVAL Index, including how the index has been performing lately. Once you’ve made your decision, create a personal investment plan. The more prepared you are, the better equipped you’ll be to keep your emotions in check, so they won’t cloud your judgment if the market becomes volatile and you need to make a decision under pressure.
  • Set a budget. The budget you set should account for your risk tolerance, as well as how much money you can afford to lose. If you let your losses escalate, you could hurt your confidence and burn up a lot of the investment capital that you’ll need for future trades.
  • Select the right platform. Figure out your specific investment goals before you start your search, so you’ll know which platform to use based on those goals. While one investor might choose a platform based entirely on the size of its transaction fees, you might care more about the quantity and quality of investment advice that you get. 
  • Grow your investments gradually. Start by investing a smaller amount of money. That way if you make a mistake due to inexperience, it won’t impact your ability to keep trading. You can always ramp up the size of your trades as you gain experience and expertise as an investor. 
  • Think long-term. To succeed long-term, you can attempt to buy and hold the MERVAL Index, with an eye on landing bigger gains. That strategy can work well when market conditions are good, but be careful as if a bear market sets in then indices tend to take a tumble. Over time, you’ll learn what’s a normal amount of market volatility, and what should prompt you to sell before things turn ugly.

3. Choose a platform to invest with

Here are some of the best platforms that you can use:

  • Brokers & trading platforms. An online broker offers easy-to-use tools at a low price for beginners and experienced users alike. On the other hand, online brokers don’t usually offer much in the way of in-depth investment advice. If you’re looking for more advanced, involved investing advice, you might want to look elsewhere.
  • Robo advisors. Robot execute trades using algorithms, thus eliminating the need for human intervention at that stage of the process and keeping trading costs in check. Some robots and Robo advisors will allow you to discuss your investment strategy ahead of time with an actual human being, but a robo advisor still won’t offer as hands-on an investing approach as a dedicated financial advisor does, though. 
  • Financial advisors. Financial advisors offer the most immersive level of investment advice. They’ll review your financial goals, explain lots of different investment options in detail, and help you meet your goals. Financial advisors charge a premium for those services, however. That extra cost can sometimes be worth the price given the high level of customer service that financial advisors provide, but as Merval Index investing is a fairly simple process, choosing a financial advisor probably isn’t worth the expense in this case.
  • Banks. Your bank gives you the convenience of conducting all of your financial services transactions with one institution. The problem is that banks usually charge high fees, without providing the level of service that top financial advisors offer. So other than the convenience factor, banks don’t offer many other advantages over other investment methods.
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What should I do now? 

If you’re ready to start now, simply log into your online broker’s website/contact the option you have decided on, and buy. Once you’re invested, keep track of your investment, so you can be prepared to change course if the market turns South.

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Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

Harry Atkins
Financial Writer
Harry joined us in 2019, drawing on more than a decade writing, editing and managing high-profile content for blue chip companies, Harry’s considerable experience in the… read more.