What is an index fund? \x0d\ index fund is a fund that tracks a certain target index in the securities market. Domestic index funds have a short birth time and a small number, and investors' awareness of index funds is relatively low. However, the performance of index funds has aroused widespread concern. Especially since the beginning of this year, the overall rate of return of index funds has surpassed that of other types of funds actively managed, among which SZSE 100 is the best, and the net growth rate of E Fund SZSE 100ETF ranks first among index funds, ranking first among all funds. \ x0d \ x0d \ index is generally the most representative stock portfolio in the market, which fully reflects the national macroeconomic development. With the rapid growth of GDP in China and the sharp increase in profits of listed companies, index funds can fully share the economic growth and bull market rise. Take SSE 50 Index and SZSE 100 Index as examples. SSE 50 Index is the most representative 50 large-scale blue-chip stocks with good liquidity in Shanghai Stock Exchange. From the perspective of its industry structure, financial and insurance companies account for 42.87%, which greatly benefits from the trend of RMB appreciation. Moreover, under the background of steady and rapid economic growth in China, the total net profit created by 50 constituent stocks in 2006 increased by 33.7% year-on-year. It is estimated that the net profit of 50 constituent stocks in Shanghai stock market will still maintain a compound annual growth rate of more than 30% in the next three years. The constituent stocks of SZSE 100 index represent the core high-quality assets of SZSE A-share market and have strong growth. In 2006, the net profit growth rate of SZSE 100 constituent stocks reached 47%, ranking first among other indexes, which fully demonstrated its high growth characteristics. This is also the main reason why funds that track the Shenzhen Stock Exchange 100 index can get a high proportion of returns. \x0d\\x0d\ In operation, the main advantages of index funds are diversification, avoiding individual stock risks and sharing investment results. Because index funds widely diversify their investments, the fluctuation of any stock will not have much impact on the overall performance of index funds, thus effectively diversifying risks. In addition, the stylized trading of index funds effectively reduces human factors. The most critical factor in the operation of index funds is the choice of the underlying index, rather than active investment. There are also enhanced index funds in the market, such as E Fund SSE 50 Index Fund, which actively and moderately operate on the basis of tracking the underlying index in order to obtain better excess returns than the index, but the proportion of active operation is very small. \ x0d \ x0d \ Buffett once mentioned that in the American market, low-cost index funds may be the most profitable tool for investors in the past 35 years. Domestic index funds are undoubtedly one of the powerful tools to share the steady and rapid growth of the national economy in a good macro environment. \ x0d \ x0d \ What is an active fund? \x0d\ Active fund means that the fund manager can freely choose investment varieties according to the fund contract, which reflects the operation level of the fund manager and the ability of the powerful investment and research team behind it. Passive funds simply copy the index, the index rises, and the fund rises; The index fell and the fund fell. Like index funds, most of them completely copy the market trend and belong to passive funds. \ x0d \ x0d \ At present, in China market, actively managed funds undoubtedly still occupy the mainstream of China fund market. In particular, last year, equity funds were all red, making active funds highly sought after. The investment of passive funds is generally an imitation index. According to the experience of international mature markets, 80% of active allocation can't outrun the market, that is to say, in the long run, only a few fund managers can actively allocate at a higher rate of return than the broader market. \ x0d \ x0d \ In China, due to the relatively low efficiency of the market, the probability of active allocation outperforming the broader market may be high, but with the maturity and perfection of the China stock market, it is inevitable to avoid this phenomenon. Therefore, investors should consider allocating passive investment funds from now on, but the risks of short-term passive funds are inevitable. \ x0d \ x0d \ From the operational point of view, of course, passive funds are easier to operate and the cost is lower. Active funds, because they reflect the ability of fund managers and their teams, spend more energy and have higher natural expenses. \ x0d \ x0d \ Experts suggest that if you invest in active funds, you should choose companies with strong research strength, stable company team and low stock turnover rate in fund operation. The choice of active fund or passive fund for investment fund also depends on your planned investment period. If your planned investment period is relatively short and you are willing to take higher investment risks, it is recommended to consider active funds. If you want to invest for a long time, and believe that China's economy will mature as soon as possible, and your expected rate of return on investment only wants to reach the average rate of return of the stock market, then index funds are certainly a good choice.