What is an index?
For example, if you are a class teacher and want to know the average math scores of middle school students at work, then you choose the math report card of an exam, add up the math scores of all the students in the class and find the average. This average score is equivalent to the math score index. You have recorded this data in every exam, so the trend of the data can reflect the average math score of your class. This is the concept of index.
So is the stock market. Each stock is equivalent to one student in the class. If you want to know the overall situation of the stock market, whether it is rising or falling, we can judge it by different stock indexes. Stock index is to choose a basket of stocks according to different stock selection rules. For example, the most common Shanghai and Shenzhen 300 Index and Shanghai and Shenzhen 3200 Index are based on the scale and liquidity, and the top 300 stocks in the Shanghai and Shenzhen stock markets are selected to form the Shanghai and Shenzhen 300 Index. The market value of these 300 stocks accounts for 60% of the market value of Shanghai and Shenzhen stock markets, which is representative and can well reflect the trend of the A-share market. There are different classifications of stocks, and the index composed of the same kind of stocks can reflect the overall situation of such stocks, such as the GEM index, which is helpful for investors to grasp the overall situation of the market. For example, we want to know how the stocks on the GEM are today. We only need to look at the rise and fall of the GEM index to know whether the GEM as a whole has gone up or down.
There are three major index systems in China: for example, the Shanghai Composite Index of the Shanghai Stock Exchange; Shenzhen Stock Exchange's Shenzhen Stock Exchange series index, such as Shenzhen Stock Exchange Index; A series of CSI indices of China Securities Index Co., Ltd. such as CSI 500 Index.
What is an index fund?
Index fund is a fund product that takes a specific index as the target, takes the constituent stocks of the index as the investment object, tracks the performance of the index by buying all or part of the constituent stocks of the index, and carries out portfolio investment. Simply put, the fund company has developed a fund product, which is to buy the same basket of stocks according to the stock selection rules of the index. This is the index fund.
Because the stocks held by index funds are very close to the index, the performance of the fund is also very close to the index.
The stock selection rules of various indexes are open and transparent, and most fund companies have developed different index funds, which can be said to be a special kind of stock funds. The purpose of index funds is to achieve the same increase as the index, so as to obtain the same level of income.
Because the stock selection rules of index are open and transparent, the fund managers of index funds are greatly limited in the number of categories of stocks when selecting stocks, so the performance of index funds depends largely on the performance of the index, and the dependence on fund managers is not high.
Throughout history, we can see that the index has been rising steadily for a long time, and the index fund has therefore become a popular investment tool in the market.
The above is the introduction of index and index fund, I hope it will help you.