Is investing in index futures better than investing in Index funds?
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This strategy will work provided you know what you are doing. If you know your way around index futures , then you can find a way to make this profitable. There are certain downsides though that you need to be aware of-
- Trading futures and future spreads is a little tricky. It is easy to accidentally buy the wrong amount.
- At least in the India, and likely in other countries, favorable tax treatment is given to long-term capital gains of buy-and-hold investors.
- Requires education and training in buying/selling futures and the underlying risks involved.
Investing in index futures will require a lot of active management as opposed to index funds which will be a passive investment. You just need to figure out which of the options is better for you.
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