How to invest in the S&P/BMV IPC Index
Investing in Mexico’s S&P/BMV IPC Index could be a great option. We’ll walk you through all the different ways you can invest in the S&P/BMV IPC Index on this page, showing you the advantages and disadvantages of each investment method and helping you make decisions with your money.
What is the S&P/BMV IPC Index?
The S&P/BMV IPC (short for the Bolsa Mexicana de Valores Índice de Precios y Cotizaciones) is the main index for tracking Mexico’s largest stock exchange, the BMV. This benchmark stock index, which gets rebalanced twice a year, follows the performance of the largest and most liquid stocks traded on the BMV, and is widely used as an indicator for the health of the Mexcian economy.
Is it a good investment?
It can be, but it depends on your goals. Mexico is the 13th-largest country in the world, with abundant natural resources and numerous fast-growing industries, so tapping into its financial markets can definitely pay off. As with the rest of the world, Mexico’s GDP growth has turned lower in early 2020 due to fallout from the global COVID-19 pandemic, but by timing an investment at the right time you could capitalise on a market upturn when it arrives. You’ll want to keep a close eye both on Mexico’s broader economy and its stock market to figure out if this is a good time to invest, and make sure you’re not putting your money into the S&P/BMV IPC Index during a bear market.
How do I invest in the S&P/BMV IPC Index?
Here’s a list of steps you should take when investing in the S&P/BMV IPC Index:
- Choose an investment type
- Use our top tips to succeed
- Choose a platform to invest with
1. Choose investment type
There are many ways to invest in the S&P/BMV IPC Index. To find the best strategy for you, consider factors such as the size of each method’s transaction fees, as well as how much customer service you want when making your investing decisions. Below, you’ll find outlines of the three of the most popular ways to invest in the S&P/BMV IPC Index.
ETF is short for Exchange-Traded Fund. An ETF is an investment fund that’s traded on a stock exchange, in a manner similar to an individual stock. You can trade ETFs any time during regular stock market hours, something you can’t do with some other investment options. The S&P/BMV IPC ETFs tend to include numerous different assets all in one, such as a batch of bonds or commodities, or all the stocks that make up an index such as the S&P/BMV IPC. The S&P/BMV IPC ETFs can be a smart investment, since you’re investing in a diversified portfolio of blue-chip stocks without paying high transaction or account management fees, and you also get the flexibility of being able to trade your investment at any time.
The downside is that buying stocks & shares and investing in the S&P/BMV IPC means you get a stake in both the best- and worst-performing stocks within that group. More selective S&P investors might opt for a different approach.
Buying individual stocks can fulfill the goals of more selective investors. You can track the index yourself by buying shares of every stock in the S&P/BMV IPC Index, instead of merely purchasing an ETF or mutual fund. This method allows you to evaluate each stock as you go, then whittle down your holdings until you own only the top-performing S&P/BMV IPC Index stocks.
The problem with buying many individual stocks is that you have to make a lot of trades to buy each one (plus even more trades when you sell the stocks you decide to offload). This leads to big 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 pools money from a large number of investors, then invests all of that money into different assets, depending on the investment strategy of the fund. An S&P/BMV IPC fund (also known as an index fund) allows you to invest in all of the S&P/BMV IPC Index’s stocks at once. This lowers your risk of incurring a big loss, since you’re holding a large, diversified batch of S&P/BMV IPC stocks, rather than putting all of your eggs into one basket. Mutual funds can either be bought through a broker or directly from the company that administers the S&P/BMV IPC fund.
Unlike ETFs, mutual funds can only be bought at the end of the stock market’s trading day, not during regular stock market trading hours. Also, buying mutual funds incurs higher fees than buying ETFs does. Generally, if you’re looking to buy and hold an investment in the S&P/BMV IPC Index for a long time, use a mutual fund, if you’re looking to make money trading your investment, use the S&P/BMV IPC ETF.
2. Use our top tips to be a successful investor
Before you invest in the S&P/BMV IPC Index, check out our top investment tips. Bearing these in mind when making any investment will help you keep a cool head and make the best possible decisions.
- Do your research. If you’re considering an investment in the S&P/BMV IPC Index, take the time to consider all the pros and cons of this choice. Build a smart investment plan by investigating the historical performance of the index and working out what gains you can expect. The more prepared you are, the better able you’ll be to keep your emotions in check, 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 from both a financial and emotional standpoint. If you let your losses pile up, you could hurt your confidence and also hurt your ability to afford future trades.
- Select the right platform. It’s important to know exactly what your investment goals are before you even start your search. If saving money is your top priority, choose the platform that offers the lowest fees (usually an online broker). If getting the most and best investment advice matters most, choose the platform that places the most focus on that (usually a financial advisor).
- Grow your investments gradually. As a novice investor, it’s best to start by investing a smaller amount of money. You can always grow the size of your investment as you become more experienced and have more capital accumulated from successful trades. 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 S&P/BMV IPC Index, aiming for bigger gains. Keeping an eye on the long term will help you ride out any market corrections, but keep your wits about you and be ready to sell if a bear market emerges.
3. Choose a platform to invest with
If you want to invest in the S&P/BMV IPC Index, you need to decide where and how to invest your money. Here are some of the best available options:
- Brokers & BMV IPC trading platforms. An online broker offers easy-to-use tools that allow you to invest in the S&P/BMV IPC Index quickly and cheaply. That’s a big plus for budget-conscious investors. That said, online brokers don’t usually offer in-depth investment advice. So if you’re looking for a more hands-on approach to get you familiar with trading, then you might want to consider another option.
- Robo advisors. Robo advisors are algorithm-powered trading platforms which execute trades automatically. Some robo advisors add to their automated experience by enabling you to discuss your investment strategy with an actual person. This, alongside the reasonable fees charged by these platforms, make robo advisors a popular choice with investors. However, it is worth noting that 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. They’ll discuss your financial goals with you in great detail, and work with you toward meeting those goals. With that level of service comes higher fees than you’ll pay for other investment platforms, though. While this can sometimes be worth the price, with a relatively simple investment like the S&P/BMV IPC Index, financial advisors are probably a bit too expensive to justify.
- Banks. Investing in the S&P/BMV IPC Index with your bank can give you the convenience of having all of your financial instruments in one place. Unfortunately, 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 many investors are seeking, and are only really the best option if your number one priority is convenience.
Here’s a list of our top 3 recommended brokers to invest in indices ETFs:
What should I do now?
If you’re all set and ready to invest in the S&P/BMV IPC Index, just log into your chosen platform’s website, pick the investment asset you like most as a way to buy into the S&P/BMV IPC Index, and buy. You should then stay vigilant, tracking your investment so you can make informed decisions about whether (and when) to hold, or sell.
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