Generally speaking, the index fund aims to reduce the tracking error, make the change trend of the portfolio consistent with the underlying index, and thus obtain roughly the same rate of return as the underlying index. This is obviously different from the goal of active partial stock funds to obtain income beyond the market level. So can index funds really guarantee the average return? Or will you lose track of the index? Today, let's discuss this often mentioned and often new topic.
Many investors may not know that index funds are divided into passive index funds and enhanced index funds.
The investment goal of passive index fund is to pursue the close tracking of the underlying index, so the tracking error is undoubtedly the most important criterion when choosing passive index fund. Tracking error refers to the deviation between the return rate of index fund and the return rate of the underlying index. If you can invest in a fund that has a good tracking effect on the underlying index, you can better share the benefits of the underlying index. Enhanced index funds pursue a certain degree of excess returns, so they will add active management components while passively tracking the index, which will make their tracking error greater than that of ordinary passive index funds.
Everyone knows that trading funds requires fees and costs, so removing this part is the actual income. You can compare their formulas:
Actual rate of return (passive index fund) = target index rate of return-the cost and expense of passive index fund buying and selling stocks.
Actual rate of return (enhanced index fund) = target index rate of return-the cost and expense of active index fund buying and selling stocks.
In fact, the difference between the two lies in cost and expense. Generally speaking, passive index funds rarely change positions and stocks, and the transaction cost is very low, while active index funds buy and sell stocks more frequently and have a high turnover rate. Naturally, their cost and non-use are higher than those of passive index funds. Therefore, from the formula, passive index funds have advantages.
This logic is sometimes not necessarily suitable for the A-share market; In the A-share market, many enhanced index funds beat passive index funds. First, let's look at the tracking value of passive index funds:
As can be seen from the above figure, the cumulative income of the two passive index funds almost coincides with the rise and fall of the Shanghai and Shenzhen 300, which fully shows that passive funds can obtain the average income of the tracked index. Let's analyze the enhanced index fund:
Obviously, in the process of tracking the index, the deviation of the enhanced index fund is greater than that of the passive index fund. Although the rise and fall are synchronous, the index will rise and fall more or less. As we mentioned earlier, although the average return is almost the same as that of passive index funds as a whole, the cost and non-use are higher than that of passive index funds because of frequent stock exchange.
So the question is, which is better, passive or exponential? In fact, it is not absolute who is good and who is not.
Because the four funds are not established at the same time and have no comparability at the same time, the author chooses China Life Hushen 300 as the benchmark, and adds and subtracts data differences to ensure the same initial net value of the four funds. By comparing the data in the above figure, we can find that passive index funds are not necessarily better than enhanced returns, which is illustrated by the fact that the enhanced performance of the rich country Shanghai and Shenzhen 300 Index ranks first; Enhanced index funds are not necessarily better than passive ones. The overall performance of China Life CSI 300 is better than that of Guo Fu CSI 300 Index.
The above data is just the tip of the iceberg of index funds. Let's choose a few more funds to find out: Are there really no absolute good funds and bad funds?
Through the analysis of the above data, it is found that most of the top funds in 15 are enhanced funds, and the same is true from 16. However, we can find that four passive funds surpassed an enhanced fund at 16, and the gap between them is smaller than that at 15. This also shows that enhancing the power of index funds in the bull market.
To sum up, the performance of the two types of index funds is different. In the bull market, the performance of enhanced index funds is better than that of passive index funds, which is related to the investor structure of A shares. There are many retail investors in the A-share market, which leads to the concentration of some industries by investors and leads to the leap of enhanced index funds. At the same time, it does not rule out that the investment and research ability of fund managers will have an impact on the performance of funds.
What I saw on the Ruyi Gangtan Fund Financial app was released by the teachers in the community. Please understand for yourself.