In this article we will be going over what a global index fund is, and why it is useful tool for long term investing
What is a global index fund?
A global index fund is a type of investment that tracks the performance of an index of publicly traded companies in stock markets around the world, which operate in different industries. There is a lot to understand in the above definition, so let's try and break it down.
When a private company is founded, shares are issued to the owners. These shares help indicate the percentage of ownership of the company. There are multiple ways for a company to raise money. One is to turn a profit. Another is to borrow money from a bank, paying interest. And another way is to invite investors to buy shares of the company for money. By selling these shares, they give away a percentage of the ownership of the company to investors, for money to help grow the business. Examples of private companies are Ikea, Mars, Aldi, LEGO.
When a company reaches a certain size, they can choose to go public and sell some of their shares at a stock exchange to the public. They do this for a number of reasons, but one of the main reasons is to raise money. This money can be used to merge with and acquire other businesses, internal research and development, payoff loans and more.