The CAC 40 index, also widely recognized as the France 40 or FRA40 index, is a benchmark index that includes 40 of the largest companies traded on the Euronext Paris stock exchange. CAC 40 is an abbreviation for Cotation Assistée en Continu, which translates to "continuous assisted trading.".
The FRA40 is a popular asset for investors on the eToro platform. It can seem difficult to trade if you're a newbie, so you might want to go through the following post that explains everything about investing on this index.
Thinking of trading CAC40 with eToro?
77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
History of CAC 40
Tracing its roots, in December 1987, the CAC40 began with a base price of 1,000. The Parisian stock exchange's all-time high to date was 6922.33 points. This occurred during the dot-com bubble in September 2000.
Until 2003, it continued to use a total market capitalization system when it shifted to a free float-adjusted market capitalization methodology. Its composition is intended to reflect a balanced portfolio of French companies, and a special committee rebalances it once a quarter. It is impossible to invest directly in it because it is an index rather than a financial instrument. However, several derivatives, such as futures contracts, ETFs, and CFDs, allow you to invest in the FRA40.
Factors to Consider When Trading CAC 40
Accessing 50 of France's largest stocks through CAC40 could be enticing; however, considering several factors before investing in the said index is essential in trading. The first item to evaluate is the country's economic aspects, especially monetary policy, as these will affect profit margins and stock prices in general.
Second, individual company performance should be carefully assessed because it is not suggested to invest impulsively in any CAC40-listed company. Doing internal research about a particular company will help traders navigate and predict how the index will move – if it will into their benefit or not.
Lastly, sociopolitical events must be considered as this will affect the market demand that will then cause ripple effects in the market in general. One example of this was the 2020 COVID-19 pandemic, which then caused the stock market to plummet.
How to Trade CAC 40?
The CAC 40 is one of the Euronext group's most popular and widely sold indices and is likely to be volatile. Companies are selected based on two rankings: the regulated turnover from the previous 12-month period and free-float adjusted market capitalization. Monitoring the performance of stocks acts as a baseline for futures, options, funds, and (ETFs). The CAC 40 cannot be bought and sold as equity, but you can trade using (CFDs) that allow you to take a long or short position without dealing with an exchange.
Trading CAC 40 via ETFs
Traders can invest in an Exchange Traded Fund (ETF) that tracks the composition or performance of the CAC 40. These are derivatives that enable investing in the FRA40. Each fund follows a specific market or index strategy and is designed to suit the hedging needs of a particular financial institution or be a low-risk option for traders.
The ETFs are created by financial bodies using a team of experts who tailor each fund to meet its specific purpose. Meanwhile, you should carefully consider the tax implications, monetary risks, and other risk factors when buying foreign stock.
Trading CAC 40 via Futures
You can trade the CAC 40 in various ways, with futures contracts being one of the most common derivatives. A futures contract is an arrangement to sell an asset at a specific price on a particular date. It enables you to gain exposure to all leading companies from a single position.
CAC 40 contracts, unlike most futures contracts, do not have a physical form to exchange because an index is nothing but a number that represents a group of stocks. Futures contracts trading on the CAC 40 index (ticker FCE) happens on NYSE Liffe between 8:00 and 17:30 on the electronic trading system NSC-VF (day session) and between 17:30 and 22:00 on Globex (night session).
Trading CAC 40 via CFDs
Investors benefit from trading the CAC 40 with CFDs as it allows you to take a long or short position. CFDs also have the advantage of providing additional leverage, allowing you to trade more than your initial deposit. However, you must exercise caution since if the trade does not work in your favor, you may lose more than your initial investment.
Make sure to choose the right broker to help you trade the CAC 40. Signing up with a reliable broker who offers both desktop and mobile trading platforms is a good option because it allows you to conveniently execute your trading operations.
Trading CAC 40 CFDs with eToro
eToro is the most rated trading CAC 40 Indices broker. It offers competitive trading conditions for stocks, commodities, forex, CFDs, social trading, indices, cryptocurrency, index funds, and exchange-traded funds (ETF). With the eToro platform, you can establish a live trading account with as little as a $50 investment. Because it is used by over 20,000,000 traders, most investors consider eToro to be one of the best trading CAC 40 Indices brokers.
When working with trading CAC 40 indices brokers, customer service is critical. Customer support may comprise a number of services to assist clients in making the most cost-effective and suitable use of the broker's services, in addition to investing and engaging with brokers.
How to Trade CAC 40 in eToro?
- Create an account on eToro or log-in your account for existing users.
- Click "Discover".
- Select "Indices".
- Look for "FRA40".
- Select BUY or SELL.
- Key in your desired amount to invest or the number of FRA40 units you want to trade.
- Review and set the stop loss, leverage, and take profit parameters.
- Select "Open Trade".
Is It Wise to Invest in CAC 40?
The CAC 40 index, which includes forty large-capitalization stocks, is France's flagship stock market index. It is a market-value weighted index with a quarterly composition review by an independent Index Steering Committee. Diversification is one of the advantages of investing in the CAC 40 index because your fund will be invested in 40 excellent companies. These 40 companies represent various industries, including pharmaceuticals, clothing, banks, aerospace, food, construction, technology, automobiles, and many other industries. The composition of the CAC 40 is already a solid point to consider whether you should invest or not.
Many times, French stocks will experience a dip caused by changes in fiscal and monetary policies and regulations. Still, one thing is for sure, as the second-largest economy in the Eurozone, it will rise back to its progressive state. And over the last ten years, the CAC 40 has been consistently delivering an average yearly return of 4.6%.
Ready to trade CAC40 with eToro?
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.