Index funds can be divided into two categories: passive index funds and enhanced index funds. The strategy of passive index fund is to buy all the stocks in the index, hoping to get the same income as the index. Enhanced index fund is to buy most of the stocks in the index, and at the same time choose some other stocks to match, hoping to get higher returns than the index.
As a passive investment product that closely tracks the index performance, the index fund has relatively small risk and relatively optimistic market development space in the future. If you don't have professional investment ability and time and energy to study investment, then the best choice is not to try to outperform the market, but to follow the market and earn the average rate of return in the investment market. This is why investment tycoons recommend index funds to wealth management company Xiaobai.
What are the advantages of index funds?
The advantages of index funds can be summarized in three aspects:
1. The risk is relatively stable.
Of course, risks and benefits are positively related. The lower the risk, the lower the return, and vice versa. In the fund market, the order of risk from high to low is: stock type > index type > mixed type > bond type > currency type.
Theoretically, the operation of an index fund is very simple, as long as you buy a corresponding proportion of securities according to the proportion of each security in the index and hold it for a long time. The stock position of index fund is 75%-95%, which belongs to the stock base of high position and has relative income space and risk.
In terms of risk prevention, on the one hand, index funds invest widely, and the fluctuation of any single stock will not affect the overall performance of index funds, which disperses risks; On the other hand, because the underlying index generally has a long history, it can predict the risk of index funds to some extent.
2. Less human factors and transparent operation.
Because the indexes tracked by index funds are uniformly formulated by the stock exchange, the influence of human factors is avoided. At the same time, index funds only need to keep an eye on the underlying index, and fund managers basically do not need to monitor the performance of the fund. Only when the sample stocks in the index are adjusted, the index fund will switch positions for shares, and the operation is very transparent.
3. Low cost
Fund investment costs mainly include: management fees, custody fees, sales service fees, subscription fees and redemption fees. Because index funds only need to keep an eye on the underlying index, do not need to change positions frequently, and almost do not need human intervention, these costs are far lower than those of active funds, almost only one-third of those of active funds.
What should I choose if I want to invest in an index fund for a long time? For long-term investment, of course, we should choose stocks with good fundamentals, value and sustained growth in performance, and the same is true for investment indexes. Index funds passively track the index, the index goes up, up, down and down. This is the fate of index funds, but index funds can reduce the losses caused by index fluctuations through value investment strategies. Harvest Fundamental 50 Index Fund is such a fund. It tracks the fundamental 50 index, selects 50 most valuable A-share stocks for investment according to four factors: sales, cash flow, net assets and dividends, and allocates stock weights according to fundamental factors.
For long-term investment, the index foundation will vote for 4 and choose 2. First class 50, Jiashi 300.
What index fund does the back end buy? Long-term investment in non-bank financial index funds and brokerage index funds.
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Index fund A good long-term investment index fund is a kind of fund that keeps pace with the market growth based on the principle of fitting the target index and tracking the change of the target index. In recent years, index investment has been welcomed by investors. The fundamental reason is that people found that in a long-term market, most active equity funds did not outperform the index. This conclusion has been confirmed by domestic and foreign markets. Index investment can not only diversify investment and reduce risks, but also greatly save costs, mainly including management fees and fund transaction fees.
Passive investment is both an advantage and a disadvantage of index funds. Some radical short-term investors often don't think so, because they can't get super-index returns, especially when the market is in a platform consolidation or wide fluctuation for a long time, long-term investors can't get better returns. When the market is in a long bear market, investment index funds will also suffer heavy losses. Nevertheless, we still believe that proper allocation of index funds is a better choice for cautious investors.
Faced with nearly a thousand A-share stocks in the two cities, many investors are at a loss, either unable to pick out potential stocks or unable to buy enough blue-chip varieties with limited funds. At this time, investing in index funds may be a good choice. Investing in index funds is equivalent to investing in all the corresponding constituent stocks, saving time and effort.
Choose stock funds or index funds for long-term investment. It is recommended to choose gold! Midrand Chu will raise interest rates twice this year, and gold is expected to rise to 1400/ oz.
Why do funds choose index funds to vote? What is the most suitable index fund for fixed investment? Because index funds track the index, in simple terms, for example, if the Shanghai and Shenzhen 300 index funds make a fixed investment, the index will rise, and generally the Shanghai and Shenzhen 300 index funds will rise. Index funds invest in index stocks. Simply put, it is to invest in 300 stocks in the Shanghai and Shenzhen 300 Index and completely track the index. The advantage of investing in index funds is to avoid stepping into the market.
Many people advocate that index funds should be the first choice for long-term investment. Why? Index funds don't see how awesome they are, do they? When the bull market comes, it's just a bull.
Why invest in index funds? Hello, why invest in index funds?
Dominant reasons: both index funds and active funds can obtain positive returns for a long time. However, investors usually buy partial stock funds (index funds and equity funds) at market highs and principal guaranteed fund or bond funds at market lows. As a result, investors' stock assets are less allocated in the process of market rising, while investors' stock assets are more allocated in the process of market falling, resulting in the final result that most investors' investments are losses.
Invisible reason: the investment cost of the fund is not only the management fee and custody fee, but also the invisible costs such as transaction commission, information sharing fee and audit fee. For active funds, these hidden costs are usually 2-7 times the explicit costs (management fees, custody fees). Compared with active funds, these hidden costs of index funds, especially ETF funds, are much lower, only about 0.5- 1 times the explicit costs. Long-term investment, the cost saved is the income, and it is appropriate to choose index funds for long-term investment.
If we find out the reasons of fund investment losses, we need to think about solutions and effective investment strategies, that is, buying index funds at low market levels and holding them for a long time. Cheap is the last word of any kind of asset investment. Take index funds as an example. Assuming that the index will rise to 10000 points in the future, the timing of buying is very important. Buying an index fund at 5000 points is completely different from buying an index fund at 3000 points. The latter made a profit of 233%, while the former only made a profit of 100%. If the market is already at a low level, such as around 3200 now, maybe we still have the luck to wait for a lower level. But if not, it will lead to short positions. If the market continues to fall, it will be a good opportunity for us to add positions, but only if you already have positions, not short positions.
Recall that most investors buy funds at the high point of the stock market, but in fact they are all the result of being "forced to empty". It is as painful as watching house prices rise without investing in real estate. The last important thing is to take over at a high level, and then continue to decline. When you can't stand it, it's like cutting meat at a low level. Where can there be asset appreciation in this cycle? In order to avoid being "forced empty", we must eat a certain amount (30%-50%) of the bottom warehouse assets in order to calmly face the ups and downs of the market.
The effectiveness of index fund is not the effectiveness of investment strategy, but more effective at low cost. Warren Buffett made it clear in his letter to shareholders on 20 17 that both large investors and small investors should insist on investing in low-cost index funds.
Buffett said that it is almost certain that in the next few years, business in the United States and a basket of stocks will be more valuable; Hedge fund investors are likely to continue to be disappointed; In the long run, it is estimated that only about 10 industries can "outperform" the Standard & Poor's 500 index, and both large investors and small investors should insist on investing in low-cost index funds.
Assuming that the average annual return of the market is 10%, in fact, the long-term return of China stock market is similar to this. The investment cost of a fund is 1%, such as an index fund; The investment cost of a fund is 3%, and index funds have more advantages in cost.
Then some people will ask, how to choose the index? This is a difficult question to answer. If you are optimistic about the broader market, buy the Shanghai and Shenzhen 300 Index; If you are optimistic about small and medium-sized stocks, buy the CSI 500 Index; Of course, there are various industry and theme indexes, such as securities, military industry, environmental protection, pension, medical care and so on.
In addition, aren't there graded B and leveraged index funds? We may be able to judge that 3000 points is the low point in the next five years, but when the bull market will come is a difficult question to answer. The leverage of the leverage index is not for nothing, and it needs to pay the financing cost. Not only that, the long night of the bear market is very painful. In order to avoid dying in the dark before dawn, it is more cautious not to hold leveraged index funds.
Author: value ETF
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