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How to invest in the NYSE Amex Composite Index
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It might be worth checking out the NYSE Amex Composite Index. There are a bunch of different ways to invest in the XAX Index of the American Exchange (also known as AMEX), so we’ll guide you through the process so you can do it yourself.
Where can I buy into the NYSE Amex Composite Index?
What is the NYSE Amex Composite Index?
It is an index that tracks the performance of stocks listed on the NYSE American exchange (also known as the American Exchange or AMEX). The exchange is a small- and mid-cap stock exchange based in New York City. By following the stocks on this exchange, the index consists of smaller names than the companies found on better-known US indices such as the S&P 500 and Dow Jones Industrial Average. The index offers opportunities for investors to try and buy low on stocks that are sometimes just at the beginning of their growth cycle.
Is it a good investment?
Taking a shot at more obscure stocks can certainly have its upside, especially if you consider the paths to success taken by some smaller stocks of the past that went to become market powerhouses. On the other hand, sometimes stocks are obscure for a reason, and the growth that investors hope for never really arrives. Viewed in that light, the index could make for an interesting investment that could see big returns, but would also likely have less stability than putting your money in another of the larger US indices.
How do I invest in the NYSE Amex Composite Index?
Here are three steps you should take when investing:
- Choose an investment type
- Use our top tips to succeed
- Choose a platform to invest with
1. Choose investment type
The investment type you use will depend on multiple factors, such as how much each approach charges in transaction fees, and the quality and quantity of investment advice you want to get. Here’s a rundown of the methods you can use to invest in the index.
ETFs
An ETF (exchange-traded fund) is an investment fund traded on a stock exchange during regular stock market hours, a feature that some other investment methods don’t offer. ETFs consist of a collection of assets such as commodities, or a collection of stocks such as the stocks you’ll find in the NYSE Amex Composite Index. An ETF gives you the benefit of diversification, without the burden of having to pay high transaction or management fees.
Individual stocks
If you want to focus on the top-performing stocks in the index, you can buy each of the index’s stocks in separate trades. This allows you to evaluate each stock, then sell to reduce your holdings until you own only the top-performing stocks within the index.
The problem with this approach is that you’ll incur heavy transaction fees making a large number of separate trades to buy stocks, then even more transaction fees when you want to sell the stocks you don’t wish to hold long-term. This approach is generally not advised with composite indices, as the number of stocks they follow is so large that the amount of time and money used up buying individual stocks is not a very efficient way of investing in them.
Mutual funds
A mutual fund is an investment fund that’s run by a professional money manager. You can invest in the fund either through a broker or through the company that administers the fund. The money manager pools capital from many different investors then invests it into different assets in order to generate returns for everyone who has put money into the fund. An NYSE Amex fund (also called an index fund) allows you to invest in all of the stocks within the index at once.
There are a few drawbacks to this approach. You can only buy stocks at the end of the stock market’s trading day, meaning you won’t be able to start trading during the regular trading hours. Also, mutual funds charge higher fees than ETFs do. So if you’re going to invest in a fund, consider a buy-and-hold investment approach that avoids frequent transactions, since a mutual fund is both more difficult and more expensive to trade than an ETF.
2. Use our top tips to be a successful investor
Before you invest, review Invezz’s top investment tips:
- Do your research. It takes a second to make a trade, but a lot longer to become a consistently successful investor. You can start practicing that level of commitment by studying the index’s recent and historical performance, as well as how the index compares to other investments. After that, you’ll want to plot out the types of gains you’re hoping for in a given time period, as well as the size of the losses you’re prepared to handle. The more prepared you are to invest, the better equipped you’ll be to cope with emotions such as fear and greed which can cloud an unprepared investor’s judgment.
- Set a budget. Consider both your risk tolerance and the amount of money you can afford to lose in order to create a strict budget before investing. One way to manage risk is to set a stop-loss order after you make your investment so that you can limit the size of any potential losses. Without a well-thought-out budget, you could expose yourself to more risk than you can handle.
- Select the right platform. Pick an investing platform based on your specific investment goals. If all you care about is getting the lowest transaction fees then you will want to look for a broker, whereas if you want the benefits of specialised investment advice, you’ll want to opt for a financial advisor. So it’s vital that you figure out your goals before you look for a platform to handle your investments.
- Grow your investments gradually. If you’re just starting off as an investor, consider starting slowly by investing just a small amount of money at first. As you gain experience and expertise, you can invest more money. In investing, as with many things in life, it’s usually a case of slow and steady wins the race.
- Think long-term. If you’re trying to land the biggest possible gains, buying and holding index long-term could be a fruitful plan. If you’re going to try that strategy, make sure to research the market and ensure conditions are in your favour.
3. Choose a platform to invest with
Here’s a rundown of the options you can use to invest:
- Brokers & trading platforms. Online stockbrokers offer easy-to-use tools that make for a very natural and straightforward trading process, even when it comes to trading. However, most online brokers aren’t equipped to provide in-depth investment advice that some investors might desire. If you’re looking for higher-level investment guidance, you might want to consider other options.
- Robo advisors. Robo advisors execute trades using algorithms, which keeps transaction costs relatively low (although still more than you’ll find with a broker). Though the trade execution process is automated, some robo advisors will still allow you to discuss your investment strategy with a human being. That said, robo advisors don’t quite offer the same level of investment guidance that a top financial advisor does.
- Financial advisors. Financial advisors provide the highest level of investment advice among all of these options, but at a cost. They’ll review your financial goals, explain many different investment options, and continue to help you in the months and years to come. All of that customer service naturally comes with a higher price tag, which may not be worth it in this case, as investing in the NYSE American Composite Index is relatively simple.
- Banks. Investing in the index with your bank gives you the convenience of storing all your financial ventures (for example your checking and savings accounts, mortgage, line of credit, and investments) with one institution. The problem is that banks charge high fees without providing the level of service that dedicated financial advisors offer. So unless convenience is an absolute must, you’re usually better off using a different approach.
Ready? Here’s our top recommended broker
What should I do now?
If you’ve made up your mind to invest in the NYSE American Composite Index, then all you need to do is head over to your chosen platform’s website, decide whether you want to buy an ETF, a mutual fund, or every individual stock in the NYSE Amex Composite Index in a bunch of separate trades, then click buy. After that, track your investment closely, as market conditions can shift quickly and dramatically.
Try some of our investment courses for beginners
Not feeling ready to invest? That’s totally fine. You can improve your investing skills by reading the easy-to-follow educational investing courses and news updates that we offer right here at Invezz.com.
Stock Markets 101
Long-term Stock Investing
Short-term Stock Trading
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