For most investors, the index itself is nothing special, and what is suitable for investors' own situation and current trend is the best. Do we know which ones? The following are the advantages of broad-based index funds compiled by Bian Xiao _ How to choose index funds is for reference only, and I hope it will help you.
What are the advantages of broad-based index funds?
The advantages of 1 broad-base index fund include low cost, high investment efficiency, keeping up with market trends, and responding faster than other funds when the market rises strongly.
Small error is also one of its advantages. The investment goal of index funds is to completely copy the index and obtain the same investment income as the index. Therefore, the tracking error rate is low, indicating that the fund operation level is high and the error risk is small.
The biggest advantage of broad-based index funds is that they cover more and wider industries, are evenly distributed and have more stable returns. Moreover, broad-based index funds are suitable for most investors.
Generally speaking, broad-based index funds have the advantages of low cost, high efficiency, small error and wide coverage. In the stock market, the reason for losses in most cases is that investors are too emotional. In order to reduce losses, it is safer to choose broad-based index funds. It should be noted that in the case of weak market, the risk of generalized index funds will be higher and will drop sharply with the stock market decline.
How to select index funds
1, find the target tracked by index funds.
The investment goal of index fund is to get the same income as tracking index, so choosing a suitable index is the key to investing in index fund.
2. Index funds with small tracking errors are preferred.
The index fund passively tracks the index, the smaller the tracking error, the stronger the management ability of the fund manager, which is more in line with the essence of the index fund.
3. Compare the backgrounds of the companies to which each fund belongs.
Index funds are passive investments, and the operation is relatively simple. However, the analysis and research of its tracking benchmark index is a complex process, which requires accurate calculation and rigorous operation flow. The stronger the fund company, the higher the investment cost and the higher the investment level.
4. Compare the rates of index funds.
The rate of index funds is lower than other active funds. It is difficult for index funds tracking the same underlying index to widen the performance gap. If they make a long-term fixed investment, the annual difference in the rates of different funds is an important reason for affecting investment. For example, the same is the Shanghai and Shenzhen 300 Index Fund, with a maximum management fee of 0.98% and a minimum of 0.5%.
As far as index fund is concerned, it follows the market index closely, and is basically only affected by the overall market and sector market trends, and is less affected by the fluctuation of individual stocks or bonds and the investment style of fund managers. In addition, the index may fluctuate greatly in the short term, and the short-term income is ugly. Therefore, index funds are more suitable for long-term investment when they are optimistic about the future trend, and they are a sharp weapon for fixed investment.
What is a fixed investment broad-based index fund?
Index funds can be divided into broad-based index and industry index.
For example, our most common SSE 50 Index, CSI 300 Index, CSI 500 Index and GEM Index are all broad-based indexes. Banking, securities, medicine, necessary consumption, optional consumption, real estate, etc. It's an industry index.
Investing in broad-based index funds and pursuing the same rate of return as the stock market is the correct way for ordinary investors to participate in the stock market.
According to various professional studies, there are very few fund managers and fund products that can outperform the market average rate of return for a long time. Good performance in the past five years does not mean that it will continue to be excellent in the future. However, one thing has been confirmed and recognized. If a fund manager or fund product has the worst performance in the past, then the probability of poor performance in the future is greater.
For the fixed investment of broad-based index funds, I think we need to choose from the following points.
First, portfolio allocation.
At present, the broad-based index includes SSE 50, CSI 300, CSI 500, CSI 800, GEM and SME board. This requires investors to match different index fund products according to their own needs.
Of course, in the view of fund master John Berg, the index covering all stocks in the market is the best, that is, the more sample stocks, the better. For example, the S&P 500 index is not good enough, while the Wilson 5000 index is the best.
Second, the size of the fund.
It is definitely not good for the fund to be too small, and there is probably a risk of liquidation. However, too large a fund is not necessarily good, which may limit the variety and quantity of investment stocks and affect the tracking deviation. Tracking deviation is an important index to measure the operation quality of index funds.
Third, the fund cost.
John Berg believes that low-rate funds are the first choice for investors. Because in the long run, low-rate index fund products are likely to bring investors the most close to the market average.
Fourth, fund companies.
Whether the fund company's philosophy is investor-centered or company's interests-centered, determines whether the fund products operated by the company distribute the maximum investment income to investors.