Introduction to Investing In Africa Investing

A mutual fund index is an investment portfolio that matches a target "index" or benchmark. Common indices include Standard and Poor's (S&P) 500, Russell 2000, Wilshire 5000, etc. This investment vehicle is quite possibly the most popular mutual fund option available to investors from individual to institutional investors.

The index is a passively managed fund, meaning that the fund is not actively managed by a person making decisions. The simplicity of replicating a market like the Russell 2000 requires little decision making to pick stocks. In other words, the Russell 2000 Investing In Africa would mirror the same 2000 stocks in the Russell 2000.

Index funds are a good way for investors to hold and let go of their investments for the long run. They are portfolios with a wide range of stocks or other investment vehicles.

Although it's commonly preferred by small investors, Investing In Africas appeal to a wide array of investors because of their advantages. Most notably, an index such as the S&P 500 has historically out-performed other actively managed portfolios. How's a non-managed fund able to beat wall street professionals? The fund actually has lower expense ratios, which means that the real returns become magnified over the long run. On average, the expense ratio is roughly 1.9% for most non-indexed funds. However, with an index, you'll find the ratio close to 0.1% expenses. This is attributed to the low maintenance involved in managing the portfolio. It takes less time and resources to manage this type of fund.

Moreover, from 1975 to 2000, only 1 out of 5 professional mutual fund managers did better than their comparative index. A fund manager with a wealth of knowledge in stock and bond investments actually performed worse than the market. So the saying goes, "If you can't beat 'em, join 'em".

There are also tax advantages for investors of Investing In Africas. Since they simply replicate a benchmark, there are fewer transactions, or fewer turn overs. The costs to sell or buy stocks, bonds or cash reserves are far less than an actively managed portfolio that sells investments much more frequently. This means the investor reports fewer capital gains due to stock sales. Ultimately, lower turnover means fewer costs to the investor.

Diversification is another key advantage. If you examine an index such as the Wilshire 5000, you'll find stocks that fall into so many different categories. As one can examine, the index holds approximately 5000 different stocks that range from small capitalization stocks to giants like General Electric. A fund that holds, say, 100 stocks may be exposed to much more volatility than this Wilshire 5000. As one can see, this fund would provide much more stability.

Despite the many advantages, Investing In Africas are not exactly perfect. The biggest criticism is that they perform just like the market. If Dow Jones goes up, then the S&P 500 Index goes up. However, in a dramatic downturn in the market, the same S&P 500 index will go down dramatically. Ultimately, the fund has no chance of beating the stock market; it's simply follows the market movements.

Index funds provide, in most cases, diversification for individuals seeking to make their portfolio safer and less volatile. Although Investing In Africas do not provide out-performing gains, they do allow an investor to sit back and let the fund take care itself for the long term.

Michael Russell

Your Independent guide to Investing

Investing Internationally - Consider South Africa!

South Africa is one of the most sophisticated and promising emerging markets in the world. It is also one of the most advanced and productive economies in Africa.

The country's remarkable ability to put centuries of racial discrimination behind it in favour of reconciliation was widely considered a social "miracle" and inspired similar peace efforts.

Post-apartheid South Africa has a government comprising all races, and is often referred to as the "rainbow nation", a phrase coined by South Africa’s Nobel Peace Prize winner Desmond Tutu.

South Africa seeks to attract real and growing international investor commitment and, at the same time, fully capitalise on the opportunities to bring about dynamic growth in the country. In so doing it aims to enhance commercial and industrial development, while creating sustainable employment and providing training for the vast labour resource pool.

Since the inception of the new democratic government in 1994, South Africa has effectively adhered to disciplined, predictable economic fundamentals, and developed a strong entrepreneurial culture, keen to jointly develop the country with international partners.

From a geographic perspective, South Africa is proud of the role it plays in facilitating and supporting the development of Africa.

Through measures to liberalise trade and industrial development policies, South Africa has become established as a dynamic and internationally competitive investment location. Such measures include tariff reform, trade and investment promotion, an industrial strategy that focuses on supply and reform of the regulatory environment.

Considered alongside political stability, these measures have been instrumental in creating an economic scenario, ensuring that local and international firms are able to operate profitably in South Africa.

In June 2006, Research South Africa published, SOUTH AFRICA - Investor's Guide to Business Law and Trade, which provides an overview of the investment climate and regulatory environment in South Africa. Included are chapters on the South African economy, business law, investment incentives, trading environment, trade relations and many other commercial aspects. Virtually all commercial legislation is individually dealt with in separate chapters. The book is an invaluable reference source for traders, potential investors, lawyers or anyone with an interest in doing business in South Africa. It contains some 170 pages and provides a broad analysis of the South African business environment.

Email enquiries@research-southafrica.com to receive a complimentary chapter or visit http://www.research-southafrica.com

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Mutual Funds

A mutual fund is perhaps one of the most popular means of long term investing and is the vehicle of choice in IRAs and 401k accounts. A mutual fund is basically a way of investing in a pool of different companies in order to minimize risk.

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