A blue and white digital chart showing index fund profits to represent ways to maximize payout.

How to Maximize Payout with Your Index Funds

Index funds are usually seen as a holding position for an investment portfolio. At best, most people consider them to be a hedge. However, index funds can definitely add growth to your investment portfolio if they're used correctly. Below are a few of the questions that you should be sure to ask yourself in order to maximize payouts from your index funds.

What can I do to make more with my investment?

If you have time to follow the market so that you can learn the midterm patterns of the indices, then you should take the time to do so. Even in the most volatile times, indices tend to have a steadier pattern that can be predicted with a little research. Although you should never assume anything is a sure thing, watching the market before you make a play definitely increases your chance of making a profit.

How do I know when to invest and when to sell?

As any good investor will tell you, you make your money when you buy, not when you sell. What this means is that you should have a plan before you actually purchase any index funds. You should have a plan for when you will purchase and when you will sell, based on the optimum times for purchasing and selling in the market. When you invest in this way, the timing of your sale will be predetermined and therefore not up for negotiation or chance.

When choosing an investment to purchase, be sure you have an intellectual advantage before entering the market. Although you should not attempt any insider trades, there are definitely many legal ways to obtain information concerning the ideal times to buy in and sell out of index funds. This is far from illegal; this is simply understanding the market.

How much should I invest in order to make a substantial amount of money?

This should also be predetermined in order for you to create an effective investment portfolio. Generally, you should invest enough to overcome the fixed charges. If you’re considering selling your share of the index fund, you need to make sure your profit is greater than the brokerage fees you will be charged.

Certain strategies have investors put their money into the stock market gradually. This is considered a conservative strategy; however, it is usually much better than putting in a lump sum all at once. Although indices are considered to be safer than most investments, lump sum trading is never the preferred option for anyone except a professional.

Last Updated: March 04, 2015