The S&P/ASX200 is a list (also known as an index) of Australia's biggest 200 companies on the Australian Securities Exchange (ASX), including CommBank, CSL and BHP to name a few.
Other countries have similar indices, such as the S&P/500, which consists of the biggest 500 public companies in the US, like Facebook, Google and Microsoft.
The companies on the ASX200 make up a big slice of the stock market and are some of Australia's most influential firms. So when there's a major event, we can expect to see the ASX200 rise or fall depending on how it impacts business.
So for this reason, we use the performance of these indices as a measure of how confident investors are about the state of the economy.
Why would you invest in it?
When you invest in a stock market index like the ASX200, you're bargaining that the underlying economy is going to continue growing over time.
The idea is that although indices fluctuate year-on-year, they tend to rise in the long run. This is partly because indices themselves aren't fixed. If one company on the list goes under or shrinks, it's simply replaced by the next biggest company.
Although the ASX200 is down by around 10% from 12 months ago, if we look over five years, it's actually grown by 14%. Expand to a period of four decades and it has risen by around 900%.
Finder survey: How long have people been investing for (outside of super)?
Response
Female
Male
I have never invested
43.95%
26.35%
Over 20 yrs
6.97%
19.11%
Between 10-20 yrs
7.3%
10.2%
Between 5-10 yrs
6.63%
9.09%
Between 2-3 yrs
8.29%
7.24%
I am not invested anymore
5.47%
7.05%
Between 1-2 yrs
6.8%
6.12%
Between 3-4 yrs
5.31%
6.49%
Between 4-5 yrs
4.15%
6.12%
Less than a year
5.14%
2.23%
Source: Finder survey by Pure Profile of 1145 Australians, December 2023
How will this impact investors?
For these reasons, investing in a stock market index is often seen as a safer choice than investing in individual stocks and has become a popular choice among long-term investors.
How do you invest in it?
There are a few ways you can invest in the ASX200. Since it's simply a list of 200 companies, you could technically just buy stocks in each of these.
However, because the ASX has a minimum requirement of $500 per company, you'd need to invest at least $100,000 plus brokerage fees to get there.
It's far more cost-friendly to invest in an index fund. An index fund is like any regular investment fund except that it tracks specific indices. Instead of buying shares in multiple companies directly, you can invest in one fund that packages them altogether.
In Australia, these typically come as exchange traded funds (ETFs) – which are simply funds that can be traded over a stock exchange. To date, there are about half a dozen ASX200 ETFs to pick from and many more that loosely track the index with various subscribed methodologies.
To invest in an ETF, you'll need to sign up to a stock broker. You could either go with a full-service broker like Morgan Stanley, or you can use an online share trading platform for about a tenth of the price.
Once you've opened a share trading account (assuming you go this route), you'll need to transfer funds into your new account and search for your ETF of choice.
The next step is a matter of entering how much you'd like to invest (the $500 minimum still applies) or how many ETF units you'd like to buy.
Trading the ASX200
It's easy to get confused around trading and investing terms as the two can be fairly interchangeable.
However, when it comes to stock market indices it's an important distinction.
Investing in the ASX200 typically refers to an index fund, which is a relatively safe way to invest. But you can also trade stock market indices through leveraged CFDs which are much riskier.
When you trade CFD indices, you're betting on the price movements of the index. This means you have the potential to earn a profit whether the index is rising or falling.
This makes it a popular tool for traders. It's considered a high-risk product because both profits and losses are amplified through leverage.
With an index fund investment or even shares, you never lose more than you invested; however, this is not the case with CFDs.
Kylie Purcell is the senior investments editor and analyst at Finder. She has completed a Certificate of Securities and Managed Investments (RG146) and specialises in investment products including online brokers, robo-advisors, stocks and ETFs.
Westpac Share Trading allows you to take control of your investments. Find out if its right for you.
Feedback
How likely would you be to recommend finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
