But index funds are not easy to choose.
For example, there are almost 100 ordinary index funds and enhanced index funds tracking the Shanghai and Shenzhen 300 Index.
With so many funds tracking the Shanghai and Shenzhen 300 Index, how do you choose?
So I'd like to share with you some experiences in selecting index funds.
1. Fund interest rate
Although the rate of index funds has obvious advantages compared with active funds, there are still differences between different index funds before. Adhering to the principle of "saving is earning", regardless of other factors, it is definitely the first choice for index funds with low rates.
Take the Shanghai and Shenzhen 300 Index as an example.
Among all 46 ordinary Shanghai and Shenzhen 300 index funds, the fund with the highest comprehensive rate (management fee+custody fee) reached 1.22%, while the fund with the lowest comprehensive rate was only 0.3%.
Don't underestimate the annual savings of 0.9%.
Assuming that the tracking errors of the two Shanghai and Shenzhen 300 index funds are the same, and both have reached an average annual rate of 10%, the return on investment of the fund with a comprehensive rate of 1.22% is 253%, while that of the fund with a comprehensive rate of 0.3% is 30 1%, with a difference of 48 percentage points.
2. Tracking error
As we all know, index funds invest in full accordance with the constituent stocks and weights of the index. Therefore, the important criterion for choosing index funds is to look at the tracking error.
Although in general, the tracking error of index funds is very small, it does not rule out that individual index funds have large tracking errors. For example, Huaan German 30(DAX)ETF Fund (5 13030).
According to the interim report of Fund 20 18:
From August 8th, 20 14 to June 30th, 20 18, the tracking error reached 20.5 1%. The tracking error in the last year is also 3.56%.
Such tracking error is obviously unqualified for index funds. Therefore, when selecting index funds, we should take a look at the tracking error of index funds.
3. Fund size
In addition to the rate and tracking error, we also need to pay attention to the size of the fund. Because the moderate scale of different types of index funds is different, let's talk about it separately below.
3. 1 general index fund
Generally speaking, the bigger the average index fund, the better. Because the larger the scale, the smaller the impact on the tracking error when purchasing or redeeming in large amount. At the same time, for index funds listed and traded, the larger the scale, the better the liquidity.
3.2 Enhanced Index Fund
For enhanced index funds, it is a good thing to have a moderate scale because of the active management of fund managers. Because if the scale of the enhanced index fund is too large, it will increase the management difficulty of the fund manager, and then affect the performance of the fund.
Finally, I would like to remind you that both ordinary index funds and enhanced index funds cannot be too small. Because the scale is too small, there is a risk of liquidation. Generally speaking, any scale below 200 million should be carefully invested.