How does the fund company's index fund work? The investment management process of index funds mainly includes the process of opening positions, reinvesting and tracking adjustment. The specific steps are as follows:

1, the choice of target index. For investors with different risk preferences and expected annualized expected returns, they can choose different target indexes, either aiming at the market index to obtain the average expected annualized expected returns of the market, or aiming at a certain index to obtain the corresponding return on investment on the premise of taking corresponding risks.

2. Establish a portfolio. After determining the underlying index, you can build a corresponding portfolio and buy various securities in the underlying index according to a certain proportion.

3. Reinvestment of dividend income. In the process of investment, a routine job of fund managers is to reinvest the cash dividends distributed by listed companies in time. Considering the operating cost, the frequency of such reinvestment should not be too high, and it is generally carried out on a monthly basis.

4. Adjust the combined weight in time. Usually, the composition of the index will change, and the addition of new shares and the increase of existing stocks will lead to frequent changes in the weight of each component stock in the underlying index, so the index fund must also make corresponding adjustments in time to ensure the consistency of the fund and index weight.

5. Monitoring and adjustment of tracking error. Tracking error describes the difference between the expected annualized expected return of index fund and the expected annualized expected return of the underlying index. Due to the limitation of transaction cost and transaction system, it is impossible for any index fund to keep consistent with the expected annualized expected return of the underlying index. Fund managers need to measure and monitor this difference in time to ensure that it is within the controllable range.