Funds can be divided into stock funds, bond funds, money market funds, index funds and mixed funds according to different investment objects. Index funds, as the name implies, are funds that invest in index stocks. Investors can build a portfolio of index funds by buying some or all of the stocks in the index. The purpose of this is to make the change trend of this portfolio consistent with the index, and the final result of this is to obtain the same expected annualized expected rate of return as the index. Index fund means that the fund operates according to the proportion of constituent stocks in the selected index (for example, Standard & Poor's 500 Index in the United States, Nikkei 225 Index in Japan, Taiwan Province Weighted Stock Index, etc.). ), and choose the same asset allocation model to invest, so as to obtain the income synchronized with the market.

2. The characteristics of index funds

Index funds are very popular in the market. Why are they so popular with investors? So what are the characteristics of index funds?

First: low cost.

This is the most prominent advantage of index funds. For index funds, the expenses of index funds mainly include management expenses, transaction expenses and sales expenses. These three expenses are common expenses of the General Fund. Because index funds adopt the holding strategy and do not need to exchange shares frequently, these expenses are far lower than those of actively managed funds, so the expenses are still relatively low. It may be less in the short term, but it will have a great impact on the expected annualized expected return in the long run.

Second: spread and guard against 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. For general funds, this advantage does not exist in general funds. And because the risk of index funds is predictable to a certain extent, this is also very important.

Third: delay in paying taxes

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. This will have a compound interest effect and bring many benefits to investors, especially for a long time.

Fourth: 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. It will be more free.