How to invest in WIG20 index funds in 2023
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77% of retail CFD accounts lose money.
It only takes a few minutes to invest in the WIG20 index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard WIG20 ETF through an online trading platform.
Where can I invest in the WIG20 index?
According to our expert research, eToro is the best ETF broker to invest in WIG20 index funds.
Both WIG20 ETFs and WIG20 CFDs are available to invest in through eToro .
Here are three more places to buy the WIG20, ranked according to their cost, security, and features.
77% of retail CFD accounts lose money.
How do I invest in the WIG20 index?
The easiest way is to sign up to a stock broker, open an investment account, and buy shares in an WIG20 ETF or CFD. This guide explains how to do it:
Step 1. Sign up to eToro
We recommend using eToro to invest in WIG20. 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 WIG20
This boils down to choosing between an WIG20 ETF or CFD. ETFs are generally better suited to investors who want to passively track the WIG20’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 WIG20
Sign into your trading account and search for the WIG20. 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 WIG20 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 WIG20 and close your position, ideally at a profit!
The different ways to invest in the WIG20
As we mentioned above, there are numerous ways to put your money into the WIG20. 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.
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 WIG20 ETF is one way of investing in the WIG20. It’s simply an investment fund that mirrors the performance of the WIG20. When you buy shares in the fund, the value of your investment will rise or fall with the WIG20 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 WIG20 index, because you can buy or sell shares in the fund throughout the day.
Examples of popular WIG20 ETFs
- iShares MSCI Poland UCITS ETF (IPOL)
- Xtrackers MSCI Poland UCITS ETF (DR)
- Amundi ETF MSCI Poland UCITS ETF (CPOL)
WIG20 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 WIG20. 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. WIG20 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 WIG20 index funds.
That means an WIG20 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.
Examples of popular WIG20 index funds/mutual funds
- Millennium FIO subfundusz Millennium WIG20+ (MFWIG20+)
- NN Subfundusz NN Akcji Polskich (NNAP)
- PZU Akcji Tureckich i Polskich subfundusz funduszu inwestycyjnego otwartego PZU (PZUATiP)
CFDs (contracts for difference) are a way to speculate on WIG20 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 WIG20 – 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 WIG20 CFDs offer the potential to outperform a fund that passively tracks the WIG20’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.
Futures contracts are agreements to buy or sell the WIG20 at an agreed price on a set date in the future. WIG20 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 WIG20 then you might want to short the WIG20 so that you still make some money if the price falls.
Another way to invest in the WIG20 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 WIG20 in order to get broad exposure to its performance.
The most heavily weighted stocks in the WIG20 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.
For the WIG20 index, the largest stocks you might choose to invest in are:
|PKO Bank Polski SA (PKO)||22.5%|
|PGE Polska Grupa Energetyczna SA (PGE)||13.2%|
|PKN Orlen SA (PKN)||11.9%|
|KGHM Polska Miedz SA (KGH)||8.8%|
|CD Projekt SA (CDR)||7.7%|
|Alior Bank SA (ALR)||6.2%|
|Powszechna Kasa Oszczednosci Bank Polski SA (PKO)||6.0%|
|Santander Bank Polska SA (SPL)||5.6%|
|PGNiG SA (PGN)||4.6%|
|Orange Polska SA (OPL)||4.4%|
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 WIG20 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%|
*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 WIG20 index?
Yes, WIG20 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 WIG20 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 WIG20 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 WIG20 index:
- The WIG20 includes the largest companies in Poland. Investing in the WIG20 means you’ll be investing in the largest and most liquid stocks in Poland, which provides exposure to a growing market.
- The Polish economy has been growing for the past decade. Poland’s economy has been growing at a steady pace for the past decade, and many experts believe it will continue to do so in the future. Investing in the WIG20 will allow for capital gains if growth continues.
- Some companies in the index have a global presence. While many of the companies in the WIG20 count Poland as the main market, a few have a global presence, which offers exposure to global economic trends.
- The WIG20 index is widely followed. Although the index is not as popular as others, it is still widely followed and has a relatively low expense ratio compared to actively managed funds. This makes it a more cost-effective way to invest in the Polish economy.
What are the disadvantages of investing in the WIG20 index?
The main risk of investing in the WIG20 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 WIG20 investing.
- A few companies make up the bulk of the index. The index is not equally weighted, and its top three companies account for approximately half of its market capitalisation. This means just a few stocks heavily influence its performance.
- The Polish economy is volatile. The Polish stock market and the economy are more volatile than others, with political and economic risks prevalent. These risks should be considered before investing.
- There are currency risks. The WIG20 index is denominated in Polish Zloty, which is a volatile currency against others. Investors are exposed to currency risk when investing in the index.
An ETF is a better option if you want to be able to buy and sell shares in the WIG20 throughout the day. An index fund is better suited to long term investors with a larger initial sum to invest.
An ETF is the best way for a beginner to invest in the WIG20 index. It’s easy to buy shares in an ETF and the costs are relatively low. You only have to pay the trading fees and a small annual management fee.
Yes, if you choose the right online broker. Not all brokers offer index investing, so make sure to find a broker that offers the WIG20 index before you sign up.
The WIG20 itself does not pay dividends, but many companies listed on it do. If you invest in an WIG20 index fund or ETF then you will receive a percentage of the dividends paid out by those companies, based on the number of shares you own in the fund.
The iShares MSCI Poland UCITS ETF (IPOL) is the best fund that tracks the index. It’s and ETF, which means it invests in all of the companies that comprise the index and is the most cost effective way to invest in the WIG20.
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