Section 1 Concepts
1. What is a securities investment fund?
Generally speaking, the securities investment fund is an investment tool, which concentrates the funds of many investors and gives them to experts to invest in stocks and bonds for the benefit of many investors.
According to China's "Interim Measures for the Management of Securities Investment Funds", securities investment funds refer to a kind of collective securities investment mode that investors' funds are concentrated by issuing fund shares, managed by fund custodians (usually reputable banks) and managed and used by fund managers (namely fund management companies), and invested in financial instruments such as stocks and bonds. While enjoying the income from securities investment, fund investors should also bear the risks brought by investment losses.
Different countries have different names and forms of investment funds, such as the "one fund" in the United States; "Unit Trust" in Britain and Hong Kong; Japan's "securities investment trust" and so on. Although the names are different and the forms are different, the essence is the same. They all concentrate the funds of many scattered investors, hand them over to experts for investment management, and then distribute the income according to the share of investment.
2. What are the characteristics of securities investment funds?
The characteristics of securities investment funds mainly include the following aspects:
1, expert professional management. Securities investment funds are operated and managed by professional fund management companies. Managers of fund management companies have generally received higher education and professional training, and have rich practical experience in securities investment, complete information and advanced analysis methods, thus overcoming the shortage of amateur professional knowledge and time and energy and improving the efficiency of asset operation.
2. The investment cost is low. Investors indirectly invest in the securities market by purchasing funds. Fund managers specifically manage and operate fund assets and conduct securities trading activities. Investors have no direct relationship with listed companies, do not participate in company decision-making and management, and only enjoy the right to distribute fund investment income.
The minimum investment of securities investment funds is generally low. In China, the face value of each fund unit is RMB 65,438+0 yuan, and the minimum investment limit is 65,438+0,000 fund units. Investors can buy fund shares according to their own financial resources. Because the fund has concentrated a large amount of funds for securities trading, securities companies will give certain preferential treatment in handling fees, and many countries and regions also give certain preferential treatment to the fund in taxation. In short, the cost of funds is usually very low.
3. Portfolio investment and risk diversification. According to the statistical research of investment experts, in voting investment, at least the risk should be dispersed by building a portfolio, and at least there should be more than 10 stocks. However, small and medium investors usually can't do this. Securities investment funds can achieve this goal by pooling small funds from many small and medium-sized investors. As long as an investor buys a fund, it is equivalent to buying dozens or hundreds of stocks and bonds. If some of them fall, it may be offset by the rise of other parts, so that investors will not suffer losses and spread risks.
4. Strong liquidity. Closed-end funds can be listed and traded on the stock exchange or OTC market, and investors of open-end funds can redeem them directly.
5. Stable income. Fund investors share the value-added income of the fund according to their share of "fund units". Generally speaking, investment funds use portfolio investment, which disperses risks to a certain extent and the income is relatively stable.
Section 2 Differences between Securities Investment Funds and Other Securities
1. What is a stock? What's the difference between securities investment funds and stocks?
Securities investment fund is a kind of investment income certificate. Stock is a stock issued by a joint stock limited company to investors when raising capital. There is a difference between the two.
1, reflecting different relationships. Stocks reflect ownership relations, while securities investment funds reflect trust relations.
2. Different operational inputs. Stock is a financing tool, and the funds raised are mainly invested in industry, which is a direct investment method. Securities investment fund is a kind of trust tool, and its raised funds are mainly invested in securities, which is an indirect investment method.
3. Risks and benefits are different. The return of stocks is uncertain, and its return depends on the operating efficiency of the issuing company, so investing in stocks is risky. Securities investment funds adopt portfolio investment, which can spread risks to a certain extent, with smaller risks and more stable returns than stocks.
4. Different ways of investment recovery. Stocks have no expiration date, so stock investors can't ask for withdrawal, and investors can only sell them in the secondary market if they want to realize their cash. Investors of open-end funds can redeem their fund shares according to their net assets, while investors of closed-end funds are not allowed to redeem their fund shares during the fund's existence. If they want to cash in, they can only sell it on the exchange or OTC market, but investors can get a discount on the investment principal when the duration expires.
2. What is a bond? What's the difference between securities investment funds and bonds?
Bonds are creditor's rights and debt certificates issued to investors when the government, financial institutions, industrial and commercial enterprises and other institutions directly borrow money from the society to raise funds, and promise to pay interest at a certain interest rate and repay the principal according to the agreed conditions. The difference between securities investment funds and bonds is shown in the following aspects:
1, reflecting different relationships. Bonds reflect the relationship between creditor's rights and debts, while securities investment funds reflect the trust relationship.
2. Different operational inputs. Bond is a financing tool, and the funds raised are mainly invested in industry, which is a direct investment method. Securities investment fund is a kind of trust tool, and its raised funds are mainly invested in securities, which is an indirect investment method.
3. Risks and benefits are different. The income of bonds is generally determined in advance, and its investment risk is small. The investment risk of securities investment funds is higher than that of bonds, and the income is also higher than that of bonds. The risk and return of securities investment funds are higher than bonds, but less than stocks.
3. What is a venture fund? What's the difference between securities investment funds and venture funds?
Venture capital, also known as venture capital, is an institution that provides financing to support emerging industries with development prospects. Its business policy is to pursue high returns in high risks. Its investment targets are mainly small enterprises and emerging enterprises that are not qualified for listing, and even enterprises that are still in the process of conception. In China, the so-called "industrial investment funds" belong to venture capital funds.
The differences between securities investment funds and venture capital funds are as follows:
1, different investment objects. Securities investment funds mainly invest in listed stocks and bonds, and venture capital funds invest in unlisted emerging small and medium-sized enterprises, especially emerging high-tech enterprises. In the United States, about 80% of venture capital funds are invested in start-up high-tech enterprises.
2. Risks and benefits are different. Securities investment funds adopt portfolio investment of securities, with less risk and more stable returns. Venture capital fund is famous for its high risk and high return. It usually takes 4-6 years to recover the investment, and there is generally no income during this period. Once you fail, you will be wiped out, and if you succeed, you will get rich returns.
3. Different financing methods. Securities investment funds are generally publicly offered and traded, with good liquidity; Venture funds are all raised by private placement, that is, raising funds from specific investment groups.
What is a hedge fund? What's the difference between securities investment funds and hedge funds?
The English name of Hedge Fund is Hedge Fund, which means "risk hedge fund". Its original intention is to use financial derivatives such as futures and options to buy and sell related stocks. The operation of risk hedging can avoid and dissolve the risk of securities investment to a certain extent.
After decades of evolution, hedge funds have become synonymous with a new investment model, that is, based on the latest investment theory, using extremely complex financial market operation skills, making full use of the leverage effect of various financial derivatives, taking high risks and pursuing high returns.
The differences between securities investment funds and hedge funds are as follows:
1, different financing methods. Securities investment funds are generally publicly offered, and most of them are small and medium investors. Because of its high risk and complex investment mechanism, although hedge funds are privately-funded, many countries prohibit them from raising funds to the public, and generally adopt the partner system, in which partners provide most of the funds but do not participate in investment activities; The number of partners is generally controlled below 100 to ensure its high degree of concealment and operational flexibility. The fund manager joins in with funds and skills and is responsible for the investment decision of the fund.
2. The requirements for information disclosure are different. All countries have strict requirements on information disclosure of securities investment funds to protect the interests of small and medium investors. Because hedge funds are mostly private funds, they evade the strict requirements of the law on information disclosure of public offering funds.
3. Different operations. The operation of securities investment funds is relatively transparent and stable. Generally, there is a clear definition of portfolio, that is, there is a definite plan for the selection and proportion of investment tools, and credit funds are not allowed to be used for investment. Hedge funds have no restrictions in these aspects at all, and can use all operational financial instruments and combinations to maximize the use of credit funds and obtain excess returns. Hedge funds are highly concealed, flexible and leveraged. Therefore, securities investment funds are more investment-oriented. Hedge funds are more speculative.
Section 3 Classification of Securities Investment Funds
1. What is the classification standard of securities investment funds?
1. According to whether the fund share can be increased or redeemed, securities investment funds can be divided into open-end funds and closed-end funds.
2. According to different organizational forms, securities investment funds can be divided into corporate investment funds and contractual investment funds.
3. According to the different risks and returns of securities investment, it can be divided into growth investment funds, income growth investment funds (balanced investment funds) and income investment funds.
4. According to different investment strategies, investment funds can be divided into stock funds, bond funds, money market funds, futures funds, option funds and warrant funds.
5. Investment funds can be divided into international funds, national funds, overseas funds, domestic funds and regional funds according to the different sources of funds and application areas.
6. Investment funds can be divided into dollar funds, yen funds and euro funds according to the currency types of investment objects.
7, according to whether the fund charges, investment funds can be divided into charging funds and non-charging funds.
What is an open-end fund and a closed-end fund? What's the difference between open-end funds and closed-end funds?
The total number of fund units of open-end funds is not fixed, which can be issued according to the development needs and redeemed by investors. The redemption price is equal to the current net asset value minus the handling fee.
Because investors can freely join or withdraw from this open-end investment fund, and there is no limit on the number of investors, it is also called * * * mutual fund. Most investment funds are open.
The total amount of closed-end funds is limited, and once the issuance plan is completed, no additional issuance will be made. Investors are not allowed to redeem, but the fund shares can be publicly transferred on the stock exchange or OTC market, and the transfer price is determined by market supply and demand.
The differences between the two are as follows:
1, the variability of fund size is different. The fund shares issued by open-end funds are redeemable, and investors can subscribe for the fund shares at any time, so the size of the fund is not fixed; The scale of closed-end funds is fixed.
2. The transaction prices of fund units are different. The buying and selling price of the fund unit of the open-end fund is based on the net asset value corresponding to the fund unit, and there will be no discount. The price of closed-end fund shares will be more affected by the relationship between market supply and demand, and the price fluctuates greatly.
3. The trading channels of fund units are different. Investors of open-end funds can buy or redeem funds directly from fund management companies at any time, and the handling fee is low. The trading of closed-end funds is similar to stock trading, which can be traded in the securities market and requires the payment of handling fees and securities transaction tax. Generally speaking, the cost is higher than that of open-end funds.
4. Different investment strategies. Open-end funds must reserve a part of their funds to cope with investors' redemption at any time, and long-term investment will be restricted. However, closed-end funds cannot be redeemed, so they can make full use of funds, make long-term investments and achieve long-term business performance.
5. The required market conditions are different. Open-end funds are flexible, easy to scale, and suitable for financial markets with high openness and large scale. On the contrary, closed-end funds are suitable for financial markets with imperfect financial system, low openness and small scale.
3. What is a corporate fund and a contractual fund? What's the difference between corporate funds and contract funds?
Corporate fund is a joint-stock investment company formed by investors with the same investment objectives who invest in specific objects (such as securities and currencies) for profit according to the provisions of the Company Law. This fund is an economic entity with legal personality, which raises funds by issuing stocks. Fund holders are both fund investors and company shareholders. After a corporate fund is established, it usually entrusts a specific fund manager or investment consultant to invest in the fund assets.
A contractual fund is a fund established based on a certain trust deed, which is generally established by a fund management company (the client), a fund custodian (the trustee) and an investor (the beneficiary) through a trust investment contract. There is such a relationship among the three parties of contractual funds: the trustor uses the trust property to invest according to the contract, the trustee is responsible for keeping the trust property according to the contract, and the investor enjoys the investment income according to the contract. Contract funds generally raise funds by issuing fund beneficiary certificates or fund units, which is a kind of securities, indicating investors' ownership of fund assets and participating in the distribution of investment rights and interests by virtue of their ownership.
American funds are mostly corporate funds; In China, Hongkong, Taiwan Province Province and Japan are mostly contractual funds.
The main differences between corporate funds and contractual funds are as follows:
1, the legal basis is different. The foundation of corporate fund is company law, contractual fund is established according to fund contract, and trust law is its legal basis.
2. The legal person qualification of the fund property is different. Corporate funds have legal personality, while contractual funds do not.
3. The vouchers issued are different. Corporate funds issue stocks, and contractual funds issue beneficiary certificates (fund units).
4. The status of investors is different. As the shareholders of the company, the capital contributors of the company have the right to express their opinions on the major decisions of the company, attend the shareholders' meeting and exercise the shareholders' rights. Investors of contractual funds become the parties to the contractual relationship after purchasing beneficiary certificates, that is, beneficiaries, and have no say in the use of funds.
5. The application basis of fund assets is different. Corporate funds use fund assets according to the articles of association, and contractual funds use fund assets according to contracts.
6. Different financing channels. The company fund has the legal person qualification, and can borrow money from the bank under certain circumstances. Contractual funds generally cannot borrow money from banks.
7. The Fund operates in different ways. Corporate funds, like ordinary joint-stock companies, are generally permanent unless they reach the bankruptcy liquidation stage stipulated in the Company Law; The contractual fund is established and operated according to the fund contract. When the contract expires, the fund operation will be terminated accordingly.
4. What is a stock fund and what is a bond fund?
Equity funds are the most important type of funds, which invest in stocks, including preferred stocks and common stocks. The main function of stock funds is to pool small amounts of money from mass investors and invest in different stock portfolios. Stock funds can be divided into preferred stock funds and common stock funds according to different types of stocks. Preferred stock fund is a kind of stock fund with stable income and less risk. Its investment targets are mainly preferred shares issued by companies, and its income mainly comes from dividend income. Common stock funds aim at pursuing capital gains and long-term capital appreciation, and their risks are higher than those of preferred stock funds.
Bond fund is a kind of securities investment fund with bonds as the investment object, and its scale is slightly smaller than that of stock fund. Since bonds are marketable securities with stable returns and less risks, bond funds are suitable for investors who want to obtain stable returns. Bond funds are basically income-oriented investment funds, which generally pay dividends regularly, with the characteristics of low risk and stable income.
Generally speaking, the income of equity funds is higher than that of bond funds, but the risk is also higher.
Verb (abbreviation of verb) What is a futures fund and what is an option fund?
Futures fund is an investment fund with futures as its main investment object. Futures are contracts, and you can buy contracts with a certain margin (generally 5%- 10%). Futures can be used for hedging, or it can be small and broad. If the forecast is accurate, you can get a high return on investment in a short period of time. If the forecast is not accurate, it will lose a lot, which is characterized by high risk and high income. Therefore, futures funds are also high-risk funds.
Option fund is an investment fund with options as the main investment object. Option is also a contract, which refers to the right to buy or sell a certain number of certain investment targets at an agreed price within a certain period of time. If the market price changes are beneficial to his performance, he will exercise this right to buy and sell, that is, exercise options; On the contrary, he can also give up the option and let the contract expire. As the price of having this right, the option buyer needs to pay the option fee (the price of the option) to the option seller. Option funds are less risky and suitable for investors with stable returns. Its investment purpose is to obtain the maximum current income.
6. What are growth investment funds, income investment funds and balanced investment funds?
Growth investment fund is a fund with long-term capital appreciation as its investment target, and its investment targets are mainly small companies with great appreciation potential in the market and stocks in some emerging industries. Generally speaking, such funds rarely pay dividends, and often reinvest the dividends, bonuses and profits from investment to realize capital appreciation.
Income-oriented investment funds aim to pursue the current income of the fund, and the investment targets are mainly those securities with relatively stable income, such as blue chips, bonds and negotiable certificates of deposit. Income-based funds usually distribute the interest and dividends they earn to investors.
Balanced fund is a fund that pursues both long-term capital appreciation and current income. These funds mainly invest in bonds, preferred stocks and some common stocks. The portfolio proportion of these securities is relatively stable. Generally, 25%-50% of the total assets are used for preferred stocks and bonds, and the rest are used for common stock investment. Its risk and return are between growth funds and income fund.
7. What is a fee-based fund and what is a non-fee-based fund?
According to whether investors need to pay sales fees for buying and selling fund certificates, funds can be divided into fee-based funds and non-fee-based funds. Sales expenses refer to the fees charged for fund promotion and brokerage commission. Sales expenses can be divided into two types, one is subscription fee, that is, the handling fee paid when purchasing funds; One is the redemption fee, which is the handling fee charged when buying back the fund. Generally speaking, the subscription fee is pre-paid and the redemption fee is post-paid.
Fee-based fund refers to the fund that investors need to pay a certain sales fee when purchasing the fund.
Fee-free fund refers to the fund that investors do not have to pay the sales expenses when they buy the fund. However, such funds generally charge a small redemption fee to prevent regular redemption.
Generally speaking, most funds are fee-based funds now.
Both fee-based funds and non-fee-based funds are open-end funds.
What are domestic funds, international funds, national funds and overseas funds?
According to the different sources of funds and regions, the following types of funds can be distinguished:
Domestic funds refer to investment funds that consist of the capital of domestic investors and invest in the domestic securities market.
International funds refer to investment funds whose capital comes from domestic sources but invests in foreign securities markets.
State funds refer to investment funds whose capital comes from abroad and invests in specific countries.
Overseas funds, also known as offshore funds, refer to investment funds whose funds come from abroad and invest in foreign securities markets.
9. What is an index fund? What are the characteristics of index funds?
Index fund refers to a fund that buys all or part of the securities in the securities market included in the index according to the index standard, and its purpose is to achieve the same income level as the index.
For example, the goal of the Shanghai Composite Index Fund is to obtain the same income as the Shanghai Composite Index. The Shanghai Composite Index Fund buys the stocks in the index according to the composition and weight of the Shanghai Composite Index, and accordingly, the performance of the Shanghai Composite Index Fund will fluctuate like the Shanghai Composite Index.
The most prominent feature of index funds is low cost, and delaying tax payment will have a great impact on the fund's income. Moreover, this advantage will be more prominent for a long time. In addition, the simplified portfolio will make it unnecessary for fund managers to contact brokers frequently, or to choose stocks or determine market opportunities.
Specifically, the characteristics of index funds are mainly manifested in the following aspects:
1, low cost. This is the most prominent advantage of index funds. Expenses mainly include management expenses, transaction expenses and sales expenses. Management expenses refer to the expenses incurred by fund managers in investment management; Transaction cost refers to the transaction expenses such as brokerage commission when buying and selling securities. Because index funds adopt holding strategy and do not need to exchange shares frequently, these expenses are far lower than those of actively managed funds, and the difference sometimes reaches 1%-3%. Although this is a small number in absolute value, the long-term cumulative result will have a great impact on the fund's income because of the compound interest effect.
2. Disperse and prevent risks. On the one hand, because index funds are widely diversified, the fluctuation of any stock will not affect the overall performance of index funds, thus diversifying risks. On the other hand, because the indexes pegged by index funds generally have a long tracking history, the risks of index funds can be predicted to some extent.
3. Deferred tax payment. Because index funds adopt the strategy of buying and holding, the turnover rate of the stocks they hold is very low. Only when a stock is removed from the index, or when investors demand to redeem their investments, index funds will sell their stocks and realize part of the capital gains. In this way, the annual capital gains tax (in developed countries such as the United States, capital gains are within the scope of income tax) is very small. Coupled with the compound interest effect, delaying tax payment will bring many benefits to investors.
4. Less monitoring. Since operating index funds does not need to take the initiative to make investment decisions, fund managers basically do not need to monitor the performance of funds. The main task of index fund managers is to monitor the changes of corresponding indexes, so as to ensure that the composition of index funds is suitable for them.
X. What is an umbrella fund? What are the characteristics of umbrella fund?
Umbrella fund refers to the establishment of several sub-funds under a parent fund, and each sub-fund makes investment decisions independently.
The main feature of umbrella fund is that it can provide investors with a variety of investment options within the fund. Because the market is constantly changing, the needs of investors are constantly changing. If investors choose between different funds again, they need to pay a lot of sales expenses. Investors of umbrella funds can switch fund types at any time according to their own needs, without paying the switching fee, which can provide investors with more choices at low cost.
In essence, the umbrella fund is just an organizational form of the fund.
XI。 What is a fund in a fund?
Funds in funds are funds that invest in other securities investment funds, and their investment portfolio consists of various funds. The investment of fund investors is two-level expert management and two-level risk dispersion, but correspondingly, fund investors have to charge two-level management fees and sales fees, and the investment cost of investors is also very high.
Section 4 Index Funds
1. What are indexed investments and index funds?
Indexing investment is a kind of securities investment that attempts to completely copy a certain securities price index or build a portfolio according to the principle of compiling securities price index. Funds invested in this way are called index funds, and their income level target is the change range of the underlying index.
Since 1990s, the performance of most equity fund managers on Wall Street in the United States has been lower than the market index in the same period. In this way, the index fund with the core idea of copying the market index trend has developed rapidly around the world, which has formed a huge impact and challenge to the traditional thinking of securities investment.
Theoretically speaking, the operation method of index fund is simple and the fund management cost is low. As long as you choose a certain market index, you can buy a corresponding proportion of securities according to the proportion of each securities that make up the index in the index and hold it for a long time. However, the market index is an abstract index obtained by mathematical processing according to the securities price at a certain moment. Index funds can't buy the index directly, but realize it by buying the corresponding securities under the actual market conditions. Due to transaction costs, time difference and other factors, the performance of index funds can not be exactly the same as the index it tracks, and there must be some differences. Therefore, index funds also need the professional management of fund managers.
The Xinghe Fund managed by Huaxia Fund Management Company is an optimized index fund with adjustable positions, that is, 50% of the fund's net asset value is invested in an index, and the reference index is the Shanghai Composite Index. In other words, Xinghe Fund will purchase 50% of the fund's net assets according to the composition and weight of the Shanghai Composite Index. Accordingly, the return target of this part of the assets in the fund is the change range of the Shanghai Composite Index. At the same time, taking into account the actual situation of China stock market, Xinghe Fund invests 30% of its net assets in growth stocks and 20% in government bonds, so as to ensure stable income and strive to win the market.
Second, what is the development history and current situation of index funds?
Index funds originated in the United States and mainly developed in the United States. The world's first index fund appeared in the United States 197 1, which is an index fund product introduced by Wells Fargo to institutional investors. At that time, there was far more opposition than support and support. There were some annuity funds in the late 1970s, including AT & amp； T), partly changed the view of index investment. After 1980s, the American stock market became increasingly prosperous, and index funds gradually began to attract the attention of some investors. It was not until the 1990s that index funds really developed. From 1994 to 1996, index funds have been successful for three years. During the period of 1994, the S&P 500 index rose by 1.3%, exceeding the performance of 78% equity funds in the market. From 65438 to 0995, the S&P 500 index achieved a growth rate of 37%, exceeding the performance of 85% equity funds in the market. From 65438 to 0996, the S&P 500 index rose by 23%, once again surpassing the performance of 75% equity funds in the market. In three years, the growth rate of 9 1% equity funds in the market is lower than that of the S&P 500 index. The concept of index fund has begun to establish a good image in investors' minds, and it has also been widely concerned by the fund industry, and the advantages of indexed investment strategy have begun to appear obviously.
According to statistics, the index fund assets held by American institutional investors were 100 billion US dollars in 1980, and by the end of 1996, the total assets of these index funds had reached 100 billion US dollars. The index fund assets held by individual investors also increased from $4 billion in 1990 to $58 billion.
After more than 20 years of rapid development, American index funds have developed into a large-scale and rich branch of the fund industry. At present, the most successful index fund managers in America are Vanguard and DFA(Dimensional Fund Advisors). The index fund managed by Pioneer has exceeded $65.438+0,000 billion, and its Vanguard S&: P 500 Index Fund) ranks second in the global fund ranking with a scale of 69 billion. At present, various fund management companies in the United States, including Fidelity, Merrill Lynch, DUEYFUS and other famous fund management companies, basically manage one or more index funds.
Xinghe Fund is an index fund in China, which makes optimized index investment based on the Shanghai Composite Index.
3. What are the advantages of index funds?
After 1990s, the great development of index funds lies in their outstanding performance, and behind their outstanding performance are their numerous advantages.
Specifically, the advantages of index funds are mainly manifested in the following aspects:
1, spread the risk. On the one hand, due to the wide diversification of investment in index funds, the performance fluctuation of any stock will not have a great impact on the overall performance of index funds; On the other hand, because the indexes pegged by index funds generally have a long tracking history, the risks of index funds are predictable to some extent, which makes index funds themselves able to avoid unpredictable risks.
2, the cost is low. This is the most prominent advantage of index funds. Expenses mainly include management expenses, transaction expenses and sales expenses. Management expenses refer to the expenses incurred by fund managers in investment management, and transaction expenses refer to the transaction expenses such as brokerage commission when buying and selling securities. Because index funds adopt the holding strategy, they don't need to exchange shares frequently. These expenses are much lower than those of actively managed funds, and the difference sometimes reaches 1%-3%, which has a great impact on the fund's income.
3. Monitoring investment need not be too complicated. Because the operation of index funds does not need to make active investment decisions, fund managers basically do not need to invest a lot of energy to monitor the performance of funds. The main task of index fund managers is to monitor the changes of corresponding indexes, so as to ensure that the composition of index funds is suitable for them.
4. Deferred tax payment. Because index funds adopt the strategy of buying and holding, the turnover rate of the stocks they hold is very low. In this way, the annual capital gains tax (in developed countries such as the United States, capital gains belong to the income tax category) is very small, and the compound interest effect will bring many benefits to investors, especially after years of accumulation.
As can be seen from the above points, the unique advantage of index funds is that they only target market indexes and exclude the management risks of stock selection and market entry. Through full investment, low cost and high risk dispersion, the investment income is slightly higher than the average, which is suitable for those.