What is an Index Fund?
An index fund is a type of equity fund designed to follow the performance of a specific stock market index, such as the OMXS30. By mirroring an index, these funds provide broad diversification at a significantly lower cost than actively managed funds.
Investing in funds involves risk.
How Index Funds Work
Index funds aim to replicate the composition of their target index. If a specific company makes up 10% of an index, that company’s shares will also constitute approximately 10% of the index fund’s holdings. As the index rises or falls, the fund’s value moves in tandem.
Advantages of Index Funds
- Low Fees: Because they do not require active stock picking by a manager, the management fees are typically very low.
- Broad Diversification: Gain exposure to a wide range of companies and sectors through a single investment.
- Consistency: You receive returns that closely match the overall market performance.
Enhanced Funds: Combining Index and Active Management
At Quartal, we also offer Enhanced Funds. These are index-close equity funds where our managers use an “enhanced” management style, actively excluding companies with poor sustainability or excessively high valuations while maintaining a low-cost structure.
Risk Disclosure
While index funds provide diversification, they are still subject to market risk. The value of your fund units can decrease as well as increase, and historical performance is no guarantee of future returns.
