Advantages of index funds:
1, and the cost is relatively low. Because the index fund adopts the investment strategy of tracking the index, the fund manager does not need to spend a lot of time and energy to choose the types of investment tools and trading opportunities, thus reducing the management cost of the fund to some extent.
2. High performance transparency. As long as investors see the rise and fall of the underlying index tracked by index funds, they can generally judge the changes in the net value of the index funds they invest in and how much profit or loss they have.
3. Reduce risks by fully diversifying investment. Because index funds widely diversify their investments by tracking indexes, their portfolio returns are basically the same as the corresponding indexes. This reduces the investment risk of investors as a whole.
4. The management process is less affected by human activities. The investment management process of index funds is mainly a passive tracking process corresponding to the target index. In this way, the influence of human factors can be reduced through more programmed transactions in the management process.
Disadvantages of index funds:
1, the fluctuation is too large. For short-term operation, the risk is great. Any fund has risks, so investors should think carefully when buying it.
2. The risk of fund redemption. If you want to quit early, you have to sell at a low level, which is easy to lose money.
3. The fixed investment of the fund is not applicable in all cases, and the effect is very different.
4. Lead the rise but not resist the fall. In any market, the position of index funds is very high, and it is impossible to avoid the risk of the stock market through the operation of fund managers.