Fund investment is an important way for domestic residents to manage idle funds. For some people with high risk preference, fund investment is an important means to participate in the capital market and obtain excess returns. However, in the process of participating in investment, investors must understand some basic concepts related to fund investment. Index fund is one of the basic concepts.

Index fund, also known as ETF (abbreviation of English exchange traded fund). Its full name in Chinese is "transactional open index fund". It is a special category of open-end funds listed on the exchange. ETF funds represent a basket of stocks, and this basket of stocks is often composed of index components released by exchanges and index companies. The composition ratio of index stocks is formulated and adjusted by exchanges and index companies according to certain compilation rules. Therefore, when investors buy a share of an index fund (or ETF), it is equivalent to buying a basket of stocks compiled according to this index rule.

Index funds have developed rapidly in China's recent capital market environment. At present, domestic index funds include a large number of broad-based index funds and a large number of industry index funds.

Broad-based index refers to an index with wide industry coverage and strong inclusiveness. Growth Enterprise Market Index, Shanghai Stock Exchange Index, Shanghai and Shenzhen 300 Index, Shanghai Stock Exchange 500 Index, Shanghai Stock Exchange 50 Index, Shanghai Stock Exchange 180 Index, Shenzhen Stock Exchange Index and Small and Medium-sized Board Index are all common broad-based indexes in China.

Industry index refers to an index covering a certain industry. CSI Military Industry Index, CSI Medicine Index, All-index Household Appliances Index, Software Service Index, CSI Computer Index, CSI Liquor Index, CSI Food and Beverage Index, etc. They are all representatives of the current domestic securities market industry index.

Therefore, when investors are optimistic about the future development prospects of an industry, they can choose the corresponding index funds that suit them to avoid the trouble caused by poor stock selection. However, index funds, like other types of securities investment, have a high risk coefficient. Before making any investment, investors should remember the principle of "investment is risky and trading needs to be cautious".

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