There is actually no standard answer to this question, because everyone has different investment preferences and risk tolerance, and it is best to choose the one that suits you.

We can first take a look at the differences between the two, and then make a choice based on our actual situation.

Strategies of Actively Managed Funds and Index Funds Actively managed funds refer to funds in which fund managers screen investment products through various methods, actively select stocks to construct investment portfolios, and exert their subjective initiative to strive to exceed benchmark performance.

Therefore, actively managed funds are more likely to choose fund managers and fund companies.

Index funds select specific index constituent stocks as investment objects, build an indexed investment portfolio based on the composition and weight of the underlying index constituent stocks, and replicate the performance of the index without actively seeking to outperform the market.

Index funds seek to obtain average market returns.

Performance of A-share actively managed funds and common indexes We can take a look at the past performance of actively managed funds and indexes in the A-share market.

We might as well select the total index of stock and hybrid funds as the representative of active funds. In the more than ten years from December 31, 2004 to October 25, 2021, the total index of stock funds (black line) increased by

974.02%, and the total hybrid fund index rose by 917.36% (red line).

As for the representatives of the index, we can choose the CSI 300 Index (green line) and the CSI 500 Index (blue line), which are relatively representative of A-shares. During the above time period, the two rose only 395.97% and 610.40%.

Data source: Wind, time range: December 31, 2004 - October 25, 2021.

Past performance does not represent the future. Funds have risks and you need to be cautious when choosing. From a long-term perspective, the cumulative performance of actively managed funds over a relatively long period of time has outperformed some common broad-based indexes.

Of course, this does not mean that active funds will necessarily perform better than index funds.

In fact, the performance of the two is better and worse, often related to market conditions.

For example, in the A-share bull market or general rising market, index funds will often outperform active funds, or there is not much difference between the two; while in market shocks, declines, etc., active funds will most likely outperform index funds.

fund.

Why does this happen?

This is mainly because active funds are managed by professional fund managers who can flexibly adjust the industry configuration of the portfolio (except for theme funds) according to market style hot spots, and select leading stocks to obtain excess returns; they can also adjust according to the rise and fall of the market.

For stock positions (of course, within the scope of the contract), if the market rises, you can allocate more stocks to pursue higher returns; otherwise, you can reduce the position and control the drawdown.

Index funds mainly track the performance of the underlying index, and their positions are basically maintained above 90%. They can quickly keep up with the pace when it rises, but they cannot lighten their positions when they fall, and they may suffer larger losses.

How to choose between the two?

Faced with active funds and index funds, how to choose?

In fact, both have their own merits, and there is no absolute good or bad. As we said at the beginning, you should choose based on your actual situation.

Active funds have a wide investment range and more flexible allocation, aiming to earn excess returns.

Therefore, investors who lack time and professional ability and hope to outperform the market in the long term can consider choosing this type of fund, but only if they choose a good fund company and fund manager.

Index fund strategies are open and transparent, relatively simple, and have high positions, but the disadvantage is that they are not flexible enough.

If you are an investor with professional capabilities and like to participate in the market on your own, you may consider this type of fund.

When you have some experience, you can also combine the two, with active funds as the mainstay and index funds as the supplement for asset allocation, and you can flexibly choose and switch according to market conditions.