1. What is the fundamental index?
Fundamental index is to select sample stocks according to the fundamental financial data of stock companies, such as net assets and cash flow, and calculate the index weight, which breaks the connection between the price of sample stocks and their weights, enables stocks with large fundamental economy to gain higher weights, and reduces the phenomenon that overvalued stocks have too high weights in the portfolio to some extent. There are more than 50 EIF and index funds based on fundamental index in the world.
2. The reason for the fundamental index.
The traditional index design is based on the market value as the weight of portfolio. Because it does not provide investors with efficient investment tools, when the market price of stocks is inefficient, the traditional index will be distorted, thus promoting the birth of fundamental index.
3. Advantages of Fundamental Index
1) Fundamental index overcomes the defect of traditional market value weighting, so that all factors are not affected by market value fluctuation, so that the true and fair value of each stock can be distinguished.
2) Fundamental index has higher expected return and safer risk level.
3) In addition to the above advantages, compared with the mainstream indexes, some indexes have good expected returns, both value and growth, and the liquidity level is appropriate.
4) Based on the fundamental indicators, we can analyze the operating level of listed companies and the macro performance of the market.
4, the shortcomings of the fundamental index
As an index, its own value will be reduced, and its flexibility and interest enhancement will be weak.
The above are the advantages and disadvantages of the fundamental index, I hope it will help you. Warm reminder, financial management is risky and investment needs to be cautious.