Stock market indices are a basket consisting of stocks of countries and show the general situation of the relevant stock market and thus the financial situation of the relevant country. By trading in stock market indices, in short, you are investing in the economy of the relevant country, which will get better or worse.
Before explaining CFD, we should focus on the concept of derivative product. Financial products developed by indexing spot market products are called derivatives. It is usually done at a later date, subject to certain conditions. Financial products from which derivative products are derived are called underleying assets. Therefore, the performance of derivatives is directly related to the performance of the underlying asset.
Investing in global indices allows investors to diversify their portfolios across various markets and regions. This diversification helps mitigate risks associated with specific countries or sectors, providing more balanced exposure to global economic growth.
Global indices provide access to international markets that may offer unique growth opportunities and exposure to industries not heavily represented in domestic markets. This can potentially enhance portfolio returns through access to diverse economic cycles and sectors.
Investing in global indices through index funds or exchange-traded funds (ETFs) offers simplicity and cost-effectiveness. These investment vehicles typically have lower fees compared to actively managed funds and provide broad exposure to a basket of stocks representing a specific index, making them a convenient way to gain global market exposure.