Why do you need an index mutual fund and how to choose the right MICEX index fund

Most recently, I talked about why it is difficult to beat the stock index over the long term. If you are a passive investor, then you cannot do without index funds.

Let me remind you that index funds are funds whose goal is to repeat the dynamics of a certain stock index. In this article I will make a brief overview of index funds for the domestic Moscow Exchange index, popular among Russian investors. Moreover, foreign index ETFs and index exchange-traded mutual funds, which can be purchased on the stock exchange, have been added to the long-existing index mutual funds.

What is a mutual fund and which fund is the most popular?

The first investment fund is a property complex that does not belong to a legal entity, based on trust management of property by a specialized management company to increase the price of the fund’s property.

Professionals have compiled a rating of the most profitable mutual funds. According to these data, the most profitable is the MICEX index fund. For this reason, it is very popular among users.

The management company owns the management of the portfolio. Investors simply buy the relevant shares and make a profit. No additional actions are required from investors. However, in this regard, depositors are charged a commission fee, the amount of which is formed from the following components:

• management company bonus;
• payment for the work of professionals - appraisers and others;
• premiums when purchasing and discounts when selling shares in the fund.

The commission amount ranges from 0 to 3%. The exact amount of fees depends on the following points:

• method of purchasing shares in the fund - purchase is made directly from the management company or through a dealer;
• deposit period - the longer it is, the less commission you will have to pay;
• deposit size - the larger it is, the less commission you will have to pay;
• conditions of the Criminal Code itself.

Statistical indicators

These indicators are calculated for 3 years.

More about the MICEX index

MICEX Index Investment Fund is a price composite stock index. It includes more than 30 of the most profitable securities and Russian depositary receipts of the best companies in Russia, which form the basis for the development of the country's economic sector.

The MICEX index is calculated using the formula - the ratio of the amount of added value of the securities being purchased to the market value of these securities on the starting date, multiplied by the initial value of the index.

The rules for calculating the index meet international standards and the requirements that deposit funds impose on indices. The calculation base is reviewed twice a year. This happens in April and October on the 25th.

What is the profitability

The most interesting thing is how much you can earn from this. You can view current SBMX ETF quotes in 4 places:

• on the Sberbank website https://www.sberbank-am.ru/individuals/etf/etf-moex/ – there you can also get acquainted with the policy, composition of assets and other interesting things regarding the fund;

• on Ru.Investing https://ru.investing.com/etfs/sberbank-moex-russia-total-return-chart – there is also an SBMX chart, forecasts and technical analysis;

• on the fund’s page on Investfand: https://pif.investfunds.ru/funds/5247/detail/1/.

If you have a broker, then find a fund with the ticker SBMX in the list of assets - quotes and all the necessary information will be provided.

So, now the cost of a share is 1040 rubles. In the future it will only grow. You can make money if you sell a share at a higher price than you bought it for.

Advantages of the MICEX index

Such an index has the following advantages:

• profit is not less than market profit;
• minimal risk of management errors;
• high ability of investments to quickly and cheaply convert into cash;
• wide choice of deposit terms;
• high security of investor assets in the event of bankruptcy of an individual company.

The strategy is designed for passive investors. The investor does not have to assess the risks of investments, which saves them from losing money if they make the wrong decision.

Investor's personal account

For ease of use and asset management, VTB Bank (PJSC) provides a client’s personal account. It can be accessed through the bank’s website, and an account can be obtained in three ways:

• registration on the bank’s website (you will need to enter your passport data and TIN information);
• use the State Services website account;
• personally contact the bank office to obtain an account.

Your personal account allows you to buy, sell and exchange without visiting a bank office or agent point.

How to buy a share?

To purchase units online you need to follow the following steps:

1. Go to the official website of VTB Capital Asset Management https://www.vtbcapital-am.ru
2. In the upper corner of the site, click on the “Client Account” label.

   

3. Follow the "Register" link.

   

4. Select the authorization method “By passport and TIN” or through “State class=”aligncenter” width=”800″ height=”498″[/img]
5. In the first case, you will need to fill out the registration form, and in the second, provide access rights to your account on the state portal class=”aligncenter” width=”800″ height=”353″[/img]
6. Enter your phone number, e-mail, code word and check the boxes for consent to data processing and the terms of the offer agreement and click on the “Send confirmation code” button.

   

7. Confirm registration via SMS code.

   

8. Log in to your personal account using the 8-digit username and password that will be sent to you as an SMS, and enter the one-time SMS password. When you log in for the first time, you must change the temporary password to a permanent one.

   

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9. To purchase a share, select a mutual fund and click on the “Buy” button.

   

10. Enter the investment amount.

    

11. Check that all fields of the registration form are filled out and click on the “Get identification code” button.
12. Fill in your bank details.

    

13. Answer the additional questions and click on the “Continue purchasing shares” button.

    

14. Confirm the purchase of shares via SMS.

    

15. Proceed to pay for the mutual fund via VTB online (for VTB clients) or from another bank card)

    

16. Fill in your card details for payment.

    

How to choose a MICEX investment fund?

When choosing an index fund, it is recommended to focus on the accuracy of following the index and low expenses. In addition, you should adhere to the following selection criteria:

• the background must be included in the TOP 10 indexes;
• high value of “net” assets.

This will reduce the risk of the management company reorienting the profile and increasing the commission fee.

To select a fund, it is recommended to browse the official websites of the most popular management companies and study the relevant information. According to current legislation, all management companies are required to indicate information about their activities and the status of funds on the pages of their portal. Here you can see the following data:

• the amount of the management company's bonus;
• premiums for purchasing shares;
• property balance;
• value and structure of assets;
• discounts when selling shares in the fund and other information.

When choosing a mutual fund, it is recommended to focus on the following criteria:

• minimum investment size;
• allowances;
• relaxations;
• premiums and expenses over the past few years;
• net asset value.

It is not recommended to choose funds:

• with high commission;
• low net asset value;
• large deposit size.

Conditions for purchasing units

You can buy a share if you submit an application at one of the agent points. A list of such points is on the website of VTB Bank (PJSC). You can contact technical support by phone and get information about the nearest location from a call center operator. When visiting an agent point or bank branch to make a purchase, you must have your passport with you. You can purchase shares online through the official website of VTB Bank (PJSC). To do this, you need to log into the bank’s client account and have the required minimum amount in your account for investment.

How to independently purchase the MICEX index

The main disadvantage of an index mutual fund is the high commission fee. The investor makes a contribution upon the acquisition and sale of shares, as well as annually as a bonus to the management company. As a result, the investor loses part of the profit. To avoid this, it is recommended to purchase securities included in the MICEX index with the help of a broker. To do this you will need:

• choose a broker;
• open a brokerage account and fund it;
• purchase securities of the MICEX index in certain proportions.

The disadvantage of such an investment is its high cost. To create the required portfolio, you will need more than 5,000,000 rubles. To reduce the size of investments, experts recommend reducing the portfolio of securities similar to the MICEX index. You should purchase shares of the 10 largest enterprises, which include Gazprom, Magnit, LUKOIL, Sberbank and other enterprises. Such a purchase will cost about 115,000 rubles.

The composition and structure of the index is subject to change every month. In this regard, the investor must independently change his own portfolio of securities.

Details about what the MICEX index is in the video.

Taxes

Please note that if you have held VTBB fund shares for less than 3 years, you will have to pay personal income tax on the positive difference between purchase and sale. The broker himself will calculate the tax amount based on current positions and transfer the money to the budget.

If you own shares for more than 3 years, then you can claim a tax deduction - 3 million rubles for each year of ownership, i.e. by 9 million rubles. I think that's enough