What are the characteristics of index funds?
1, passive management. Index funds do not need fund managers to actively choose investment targets, but only need to be configured according to the composition and weight of the index, with low management cost and no interference from human factors.
2. This ratio is very low. Due to passive management, the management fees, custody fees and transaction fees of index funds are much lower than those of active funds, which can save investors' costs and improve the rate of return.
3. The risks are dispersed. An index usually contains a variety of stocks or bonds. Following the index investment can effectively reduce the risk of a single asset and improve the stability of the portfolio.
4. High transparency. The investment target, proportion and rules of index funds are all open, so investors can understand the investment situation of funds more clearly and compare the differences between funds and indexes conveniently.
How to choose high-quality index funds?
1, select the appropriate index. Different indexes have different characteristics and styles, such as generalized index, industry index and strategic index. Investors need to choose their own index funds according to their risk preferences, income expectations, liquidity and other factors. Generally speaking, broad-based index funds are relatively stable and suitable for long-term holding, while industry index funds are relatively concentrated and suitable for grasping industry opportunities.
2. Choose a fund with large scale, good liquidity and low rate. There may be more than one fund tracking the same index, and investors can compare the differences between these funds. Generally speaking, large-scale funds have better tracking effect, funds with good liquidity are better realized, and funds with low rates can save costs.