how to make money when dow jones drops

peterparker_3

hi

Is it possible to invest in the dow jones or ftse index alone and not the companies that make up these indices ?

Thanks

thrupence

peterparker wrote: »

hi

Is it possible to invest in the dow jones or ftse index alone and not the companies that make up these indices ?

Thanks

Yes, of course it is. You can do this easily through a spreadbetting company.

And I bet one of your friends will be along shortly to recommend such a company.

:beer:

Paul_Herring

peterparker wrote: »

Is it possible to invest in the dow jones or ftse index alone and not the companies that make up these indices ?

Yes. What you're after is called a 'tracker.'

They come in two types:
Distribution: Dividends are given back to you.
Accumulation: Dividends are rolled back into the tracker such that the value increases compared to what it is tracking.

Simplistic example: you buy £100 worth of units tomorrow.

One year later, the FTSE all share (or whatever you want to track) increases by 7%, and dividends worth an average of 3% are handed out.

At the end of that year, the distribtution would be worth £107 and you'd have £3 sent to you, the accumulation would be worth £110.

Reaper

If you really mean make money as the index drops then you wil probably have to resort to spreadbetting or short selling. Neither of which I'd recommend unless you really know what you are doing.

However if your plan is simply to buy into an index believing that they are currently low and will go up again then it is some form of tracker that you want.

Rather than a traditional tacker I suggest ETFs. To save me explaining them here is a paragraph I nicked from the Independant:

There is now a new financial product on the market - exchange-traded funds (ETFs) - which are cheaper than tracker funds but serve the same purpose. ETFs are basically baskets of shares which replicate an index and are then traded on the stock market in the same way as individual shares. Mr Dampier says iShares - ETFs created by Barclays Global Investors - carry charges of between 0.3 and 0.4 per cent, and unlike most share purchases, there is no stamp duty to pay.

As it says iShares are one of the main players. You can go and look at all the ones they have available on their web site but you can't buy from them directly, you'll have to go through a stockbroker just as you do when buying normal shares. Most of the online companies, such as www.selftrade.co.uk to name one of many, will let you trade in them.