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The BEL 20 index is a capitalisation-weighted index that functions as the most widely used indicator for the performance of Euronext Brussels and the strength of the Belgian economy. It is comprised of between 10 and 20 companies traded at the Belgian Stock Exchange.
The information below will give a brief summary of the index’s history, rules, and the options you have for investing in the BEL 20 index.
The BEL 20 index was started on 30th December 1990 with an initial base level of 1000 index points. The highest the index has ever got to is 4756.82, which it reached on the 23rd May 2007, before seeing a steep fall in value due to the global financial crisis.
The index has by-and-large shown strong growth throughout stable periods of recent history, however it did see sharp falls in value due to both the 2007-08 financial crash (as mentioned above) and the dotcom bubble of the early 2000s. Similarly, the global economic impact of the coronavirus outbreak has also caused a fall in the value of the BEL 20 index.
As is implied by its name, the BEL 20 aims to be composed of 20 companies whose value gives an insight into the Belgian economy, although the technical minimum number of listings is 10. The index has had a full 20 listings throughout the majority of the last decade, except between May and june 2018 when the number fell to 19 after Sanofi launched a takeover of Ablynx (the vacant spot was filled by arGEN-X in June).
In order to determine which companies’ stocks are included in the BEL 20 index, certain criteria must be met – including being “representative of the Belgian equity market” and having a free float market capitalisation of at least 300,000 times the price of the index. The BEL 20 index is reviewed annually based on the last Friday in February’s closing prices and the individual weighting of each company in the index capped at 15%.
As indexes are merely institutions that track the value of different stocks, the idea of investing in an index can sound odd. However, using a financial product called an Index ETF (Exchange-Traded Fund), investors can track a basket of stocks within an instrument that can be traded on an exchange.
This has become an increasingly common method of investing, as many traders like the level of diversification available with Index ETFs, and there are a variety of ETF options when it comes to the BEL 20.