According to the replication method, index funds are divided into passive index type and enhanced index type. There are differences in investment strategies and selection methods, but the overall idea is the same.

1, target selection index (core)

Index funds track the target index, how the index performs, and how the index funds perform. Therefore, the first step in choosing an index fund is to choose a good target index, which is the core. So, how to choose a good index?

1) wide bottom and narrow bottom

Generally speaking, stock indexes can be divided into broad base and narrow base. SSE 50, CSI 300, CSI 500, GEM index, etc. Belong to a broad foundation. The investment scope of this index is very wide, distributed in different industries and themes. The market has a good performance as soon as it comes, which is suitable for many investors to consume. The indexes such as medicine, dividends and computers belong to the narrow base. This index has a narrow investment scope and concentrated risks.

2) Risk matching

The underlying index generally has a long historical track, which can predict the risk of index funds. For example, the stocks of SSE 50 and SZSE 300 are large-cap stocks, while the stocks of SSE 500 and GEM with low historical change rate are small and medium-sized stocks with high growth and historical change rate. Investors must also meet their own risk preferences when choosing the target index.

3) conform to the market style

Choosing the target index must conform to the current market style. Otherwise, the market is seriously divided, not only can't make money, but also lose money. As can be seen from the sharp ratio in the above table, large-cap stocks have performed well in recent years, and the brilliant small and medium-sized enterprises have fallen miserably. At present, the market style continues, and the SSE 50 has dropped by 16 points this year. 46866.68868686666

But it is gratifying that the evaluation of CSI 500 and GEM is extremely low. At this time, the admission cost is low, and the A-share market has the characteristics of rotation. I believe that one day, small and medium-sized stocks will usher in spring.

4) Low evaluation

Evaluation is also an important criterion to judge whether the index is worth investing. Whether it is a wide radix or a narrow radix, we should underestimate it as much as possible. On the one hand, low evaluation represents a high safety limit, and there is limited room for further decline. On the other hand, the index greatly underestimated the entry of profit-seeking funds, and the long-term evaluation returned to a reasonable level.

Generally speaking, the history of PE and PB is below 30%, which is underestimated. In addition to PE and PB, ROE is also a frequently referenced indicator. At present, the information of CSI 500, GEM index, all-index optional, all-index medicine and all-index is extremely underestimated (percentile < from the ROE of 10%), CSI 500 is poor and its profitability is poor.

For the above dimensions, you can basically choose the target index that suits you, and then choose a specific fund. Take the CSI 300 as an example. At present, there are 46 passive index types and 36 enhanced index types in the market.

2. Date of establishment

Index funds, like independent funds, try to choose old funds with early establishment date, so as to understand the operation and performance of the fund for a longer time.

We screened out the old funds that were established more than three years ago (of course, three years is only a reference value, and the number of selected funds is small, so the time can be shortened if they are established later). Except for half, the other 28 funds are passive exponential, and 15 only enhances exponential.

3. Passive exponential type: tracking error

As we know, the passive index type invests completely according to the constituent stocks and weights of the index, with the goal of obtaining the same income as the index. Therefore, the standard for choosing passive index type is to look at tracking error.

The smaller the tracking error, the higher the investment fit between the fund and the index, indicating that the fund is better. Conversely, the greater the tracking error, the greater the risk of deviating from the original intention of the investment index.

We sorted the 28 selected funds according to the tracking error in the past three years, and we can see that

1) The top five are ETFs. ETF needs off-site physical purchase, and the investment threshold is high (at least several hundred thousand). It is recommended to buy and sell on the spot. You can buy it by investing several hundred dollars with one hand, but you need a stock account.

2) In addition to ETFs, there are three ETF-linked funds and 1 passive index funds among the top 10 funds (ICBC Credit Suisse SSE Depth 300). Is there a difference between ETF linked funds and other passive index funds? Of course there is.

First of all, in terms of positions, at least 90% of ETF-linked funds directly invest in ETFs, and some stock market prices. Other passive index funds that have always maintained high positions only need 80% of funds to invest in stocks, which is more flexible. Secondly, the exchange rate of ETF-linked funds is relatively low (but not absolute). For example, the management fee of ICBC Credit Suisse CSI 300 is the same as that of ETF-linked funds in the following table).

4. Enhanced exponential type: information ratio

While strengthening the index tracking index, we should actively invest. The standard to improve the index is no longer the tracking error, but the information ratio. What is information ratio?

The excess income obtained represents the positive risk of the company. The information ratio exceeds 0, indicating that the fund has obtained the target index and excess returns. The higher the information ratio is, the higher the excess returns that fund companies get in tracking errors, and the stronger their ability to actively invest.

5. Scale

Besides tracking error and information proportion, different types of index funds have different moderate scales.

The bigger the passive exponential type, the better. The larger the scale, the smaller the influence of fund redemption on tracking error. For example, the size of a fund is10 billion, and the increase in one day is 5%. A large number of funds subscribed the day before enjoy the increase in the day. However, due to the fact that the funds on that day have not yet arrived, the fund manager can't open a position immediately, so the increase of the fund on that day was diluted.

For the enhanced index type, the scale is moderate and reasonable due to active investment. Excessive scale will increase the difficulty of fund manager management and affect fund performance. Of course, the scale should not be too small. Please pay attention to the risk of liquidation.

6. Exchange rate

Indeed, compared with the enhanced index, the exchange rate of passive index is lower. Our previous course also said that passive index is suitable for long-term investment. Of course, if you think that the expected return brought by the enhanced index can make up for the high exchange rate and risk, then you choose the enhanced index.

In addition, when choosing the same type of fund, try to choose a fund with low exchange rate, which can save a little. Regarding the share of C, we should not only look at the management fee and management fee, but also look at the sales service fee. It should be noted that the premise of comparing exchange rates is to choose a good fund. Otherwise, the fund is not good and the exchange rate is useless.

Let's compare the exchange rates of the selected funds: passive index type, Harvest SSE 300ETF exchange rate is the lowest (stock account is required), ICBC Credit Suisse SSE 300 times, Harvest SSE 300ETF index type with slightly higher connectivity, and the exchange rate of Xingquan SSE 300 is 0.23% lower than that of Fuguo SSE for 300 years (note that these two funds are easy to buy and recommended by research).

7. The strength of the fund company

Choosing this is basically the same. The last step is to look at the strength of the fund company. Well-known and time-honored fund companies are more reliable.

In addition, if the enhanced index type is selected, the investment ability of the fund manager also needs to be looked at, such as working hours, investment experience and past management performance. If the fund manager changes, we should also pay attention to the next performance of the fund.