How to invest in NGX 30 index funds in 2023
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10/1077% of retail CFD accounts lose money.
It only takes a few minutes to invest in the NGX 30 index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard NGX 30 ETF through an online trading platform.
Where can I invest in the NGX 30 index?
According to our expert research, eToro is the best ETF broker to invest in NGX 30 index funds.
Both NGX 30 ETFs and NGX 30 CFDs are available to invest in through eToro .
Here are three more places to buy the NGX 30, ranked according to their cost, security, and features.
77% of retail CFD accounts lose money.
How do I invest in the NGX30 index?
The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an NGX 30 ETF or CFD. This guide explains how to do it:
Step 1. Sign up to eToro
We recommend using eToro to invest in NGX 30. 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 NGX 30
This boils down to choosing between an NGX 30 ETF or CFD. ETFs are generally better suited to investors who want to passively track the NGX 30’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 NGX 30
Sign into your trading account and search for the NGX 30. 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 investment
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 NGX 30 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 NGX 30 and close your position, ideally at a profit!
The different ways to invest in the NGX30
As we mentioned above, there are numerous ways to put your money into the NGX 30. 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.
NGX 30 ETFs
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 NGX 30 ETF is one way of investing in the NGX 30. It’s simply an investment fund that mirrors the performance of the NGX 30. When you buy shares in the fund, the value of your investment will rise or fall with the NGX 30 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 NGX 30 index, because you can buy or sell shares in the fund throughout the day.
NGX 30 index funds
An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the NGX 30. 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. NGX 30 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 NGX 30 index funds.
That means an NGX 30 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.
NGX 30 CFDs
CFDs (contracts for difference) are a way to speculate on NGX 30 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 NGX 30 – 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 NGX 30 CFDs offer the potential to outperform a fund that passively tracks the NGX 30’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.
NGX 30 futures
Futures contracts are agreements to buy or sell the NGX30 at an agreed price on a set date in the future. NGX 30 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 NGX 30 then you might want to short the NGX 30 so that you still make some money if the price falls.
NGX 30 stocks
Another way to invest in the NGX 30 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 NGX 30 in order to get broad exposure to its performance.
The most heavily weighted stocks in the NGX 30 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.
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 NGX 30 index?
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% |
| Individual stock | $0-$3 | None |
| CFD | $0 | None |
*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 NGX 30 index?
Yes, NGX 30 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 NGX 30 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 NGX 30 index?
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 NGX 30 index:
- The index provides exposure to Nigeria’s largest companies. The NGX 30 comprises the 30 largest stocks on the Nigerian stock exchange. Investing in the index will expose you to some of the leading Nigerian companies.
- It includes companies from a diverse range of industries. The NGX 30 includes companies from various sectors, such as banking, consumer goods, telecommunications, oil and gas, and more.
- Nigeria is a growing economy. Nigeria is one of Africa’s largest economies with a growing population. Its economic potential, natural resources, and investment-friendly environment make the NGX30 an attractive option for long-term investors.
What are the disadvantages of investing in the NGX 30 index?
The main risk of investing in the NGX 30 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 NGX 30 investing.
- It can be a volatile index. Similarly to other indexes, the NGX30 can be volatile, and it is not uncommon for large fluctuations in price. This is an important factor to consider, especially for investors with a short-term time horizon.
- The NGX30 is a small index. The index only consists of 30 stocks, which means it is relatively concentrated compared to other indices. Its performance relies on just a few companies, which can be risky, especially if a few underperform.
- Nigeria has an unstable political environment. Nigeria does not have a stable political landscape when compared to other countries. This can impact the wider economy and, ultimately, the NGX30.
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