What are the disadvantages of index funds? Fund fixed investment business is an internationally accepted fund financing method similar to bank zero deposit and lump sum withdrawal, which is a financing method of purchasing a certain fund product at the same time interval and the same amount. So today, Bian Xiao is here to sort out the shortcomings of index funds. Let's have a look!

What are the disadvantages of index funds?

1, the redemption risk is high.

If investors want to sell the fund in advance, there may be a situation of buying high and selling low, and the difference will not be earned, resulting in the loss of funds for investors.

2, the fluctuation is not big

The fluctuation is not big, the expected income is not very high, and the income obtained by the fund's fixed investment is average income, so it is impossible to obtain excess income. Generally, if you want to expect higher returns, it is suitable for funds with large fluctuations.

3. Lead the rise but not resist the fall

Most index funds will fall to varying degrees when the stock market falls, which will also reduce investors' income. Moreover, index funds generally have high positions in the market and cannot avoid risks through fund managers, so once they fall, they will fall a lot.

How to buy index funds for fixed investment?

1, look at the fluctuation of the fund.

Choose index funds with large fluctuations to invest. When the market is in a negative situation, the fund with large fluctuation will buy more stocks than the fund with small fluctuation, so the expected return in the market will be higher.

Step 2 buy and sell

In other words, using the principle of "smile curve" to keep buying when the fund falls is equivalent to investors spending the same money to buy more fund shares. If it goes up, it will continue to sell, so that it can also take profit in time, that is, it will close the position when it is ready.

Step 3 choose the right time to buy

You can choose to trade every Thursday, because most funds fell on Thursday, and the decline was greater than the increase. At this time, the investment cost is low; If you make a fixed investment every month, you can choose the beginning, middle or end of the month.

Step 4 stick to it for a long time

The fixed investment of index funds has been restricted by funds. If the investment is too small and the time is not long, the expected return may not be obvious, and investors need to persist for a long time. The longer the time, the higher the expected income may be.

5, look at the tracking error

Tracking funds with small errors shows that the stronger the management ability of fund managers, the more they can help investors achieve their income goals.

What does the huge fund redemption mean?

The huge redemption of the fund means that the net redemption amount of the open-end fund on that day exceeds 10% of the fund size, in which the net redemption application for a single open day refers to the sum of the redemption application of the fund plus the transfer-out application of the fund when the fund is converted, and the balance after deducting the sum of the subscription application of the fund and the transfer-in application of the fund when the fund is converted.

Faced with this situation, the fund manager can postpone the remaining redemption application or accept full redemption on the premise that the proportion of redemption accepted on the same day is not less than 10% of the total fund share of the previous day, that is, when the fund manager thinks that he has the ability to pay the investor's full redemption application, he will follow the normal redemption procedure.

Investors can choose two ways: continuous redemption or cancellation of redemption. Continuous redemption means that investors choose to redeem the deferred redemption application on the next fund open day in turn.

Let me talk about the shortcomings of index funds. Especially a shares.

The first disadvantage is that the index fluctuates too much. The bull market is too fast and the bear market is too long. The bull market is less than three years, and the bear market is four or five years. The bull market is not only fast, but also huge. The United States and Europe have risen by 10 years, and A shares can rise in one or two years. This feature is a great good thing for a small number of people. 10 can eat several rounds of bulls and bears every year. But for most people, this is a nightmare. Because most people are in a bull market. It is normal to buy an index fund for several years without making money.

Us stocks are different. Nasdaq hit a new high yesterday, rising slightly for dozens of consecutive quarters. You don't believe it. Earn when you enter the market. But in fact, if you calculate, it is no bigger than the bull market completed by A shares in one or two years.

Then, why is it difficult for the United States to actively invest in the index, while the A-share active funds perform well? Because A-shares fluctuate too much, you can outperform the index with a little high throwing and low sucking. So your portfolio can be an "active portfolio", and the varieties in the portfolio use index funds. Turn yourself into a controllable active fund, and you will have a great chance of getting good results.

The second disadvantage is that there is no new income. In fact, for most people, creating something new is like painting a cake to fill their hunger. They won't win the lottery, but at least there is hope. It will look good as soon as you sign the bill. Index funds actually have new income, but the net impact is very small. This is a characteristic shortcoming of the stage.

The third is that the trading volume of many ETFs in the market is too small, lacking market makers and two financing targets are not enough.

What are the advantages and disadvantages of index funds?

Advantages:

1, low cost

Index funds generally track a specific index and do not need managers to have any investment strategies, so the investment cost is not high, and the management cost will be lower than that of stock funds or enhanced index funds.

2. High performance transparency.

Because index funds track an index, you can know the changes of the fund's net value directly by looking at the ups and downs, which can also prevent investors from being defrauded.

3. Diversified investment

Index funds widely diversify their investments by tracking indexes, and their portfolio returns are basically consistent with the corresponding index returns. Individual fluctuations have little impact on the whole, which reduces and disperses investment risks well.

4. Less affected by other factors

Index funds follow the index operation, and can reduce the influence of external human factors through more programmed transactions in management, and will not suffer losses because of the subjective factors of fund managers.

Disadvantages:

1, the income is too passive and low.

If the ETF goes up, Index funds have income, otherwise there is no income, and the income is passive. Index funds are less volatile and less risky, so the expected return is lower.

2. lead the rise and not resist the fall.

Index funds are generally high positions, and it is impossible to control and avoid stock market risks through the operation of fund managers.

Why not advise novices to buy index funds?

1, lack of professional knowledge

Index fund is a passive fund, which takes the trend of an index as the subject matter, and requires investors to predict the trend of the index very accurately in order to make a profit, while novices generally lack relevant professional knowledge and technology and cannot predict it accurately. If the market is good, you may earn money, and if the market is bad, you may lose a lot.

2. High requirements for investors.

Index funds earn the average income of the market, so there is generally no big fluctuation in a short period of time, which will make some investors impatient and sell as soon as possible. It is recommended to hold it for a long time.