Zap Seminar – Michael Murmer – New ways to Trade the Indices

It is possible for investors to gain an insight into the performance of an asset class. The performance of portfolios designed to replicate the performance of a given asset class is benchmarked through the use of indices.

TYPES OF INDICES

There are six types of indices.

• Capitalisation indices
• Fixed income indices
• Residential property indices
• Sector indices
• Strategy indices
• Volatility indices

BENEFITS OF TRADING INDEX BASED INSTRUMENTS

You can gain exposure to the breadth of instruments in one transaction with index based instruments. Buying each and every instrument in the correct proportion would be an alternative. You can gain exposure to an index or exposure with a specific risk profile with some instruments. You can profit from a downward move in the value of an index with some instruments. This is of benefit to investors with a bearish view on an index or investors with an existing portfolio that tracks the index and they need a means of hedging the portfolio against an adverse movement in prices.

KEY FEATURES OF INDICES

Broad measures of performance of an asset class or a subset of that asset class are what the Indices are designed to be. Stakeholders are given an understanding of how decisions governing index calculation are made when the methodology used to create an index is published. Sometimes indices are designed to be investable. So that index tracking portfolios can be created, the securities must be easy to trade.

HOW TO TRADE

Exchange traded funds, futures and options are available. Gaining exposure to the performance of the index is one of the ways these instruments can be used. The find a broker tool can help investors find a broker who will allow them to trade ASX products over certain indices.