How indexes are calculated, cap-weighted vs. equal-weighted, ETF creation and redemption, premiums and discounts, compounding fees, leveraged ETF decay, choosing a fund and dollar-cost averaging.
For: learners who want to invest long-term with index funds
This course uses ideas from the courses below (optional; you can start right away).
An index boils a basket of stocks down to a single number. It's the market's thermometer.
Do big and small companies carry the same clout in an index? Compare cap-weighted and equal-weighted to see who moves the index.
An ETF packs a whole basket of stocks into one fund, which then trades on an exchange just like a stock.
An ETF's market price can drift from the true value of what it holds. Arbitrage by authorized participants pulls the price back to NAV.
A 0.03% and a 1% annual fee look similar, but after 30 years the gap is huge.
A 2x leveraged ETF doubles each day's move, but in a long choppy market it quietly "leaks".
There are often several ETFs tracking the same index. Compare fees, tracking difference, fund size and bid-ask spread, and work out which is cheaper for long-term holding vs. frequent trading.
Buy a fixed amount every month: you automatically buy more when prices are low and less when they're high. Compare dollar-cost averaging with a lump sum in different markets.