How to choose index funds? As an important tool for long-term asset allocation and short-term band operation, index funds have been recognized by more and more investors. There are more and more index funds to choose from in the market. Investors are advised to consider how to choose an appropriate index fund for investment from the following perspectives:

First, choose the index.

The investment goal of index funds is to obtain the expected annualized expected rate of return of the underlying index. From this perspective, an investment index fund is an investment index. So choosing a suitable index is the key, so what should be the selection criteria of the index? In fact, the index does not matter whether it is good or bad. The most important thing is to suit your investment goals. (View: main tracking indicators of index funds and their representative funds)

Second, look at the strength of fund companies.

When choosing any fund, the strength of the fund company should be the primary factor that investors pay attention to, and index funds are no exception. Although index funds are passive investments, fund companies don't need complicated operations such as stock selection and timing like active funds, but this doesn't mean that every fund company has the same ability to manage index funds.

Third, look at the tracking error of the index.

When investors invest in index funds, most hope that index funds can completely copy and track the performance of the index, so as to achieve the investment effect of short-term band operation or long-term asset allocation. Therefore, judging whether an index fund has a good investment operation depends not on how outstanding the performance of this index fund is, but on whether this index fund has a good performance of replicating the index. This is the "tracking error" that the market cares about. Investors can know the matching performance of the fund in the past by consulting the historical data of the fund. (Viewpoint: Reasons for tracking errors of index funds)

Fourth, look at transaction costs and convenience.

For investors, there are two channels to buy index funds: one is to buy through their own banks or fund companies' websites; The second is to buy in the secondary market through stock accounts. The latter is limited to buying index funds listed on the exchange, such as LOF and ETF.

Introduction: Introduction and purchase guide of index funds.