How about financial index fund? OK or not? What are the SSE 50 Index Funds? Which is better?
Advantages of index funds:
1, the cost is relatively low.
Because the index fund adopts the investment strategy of tracking the index, the fund manager does not need to spend a lot of time and energy to choose the types of investment tools and trading opportunities, thus reducing the management cost of the fund to some extent.
2. High performance transparency.
As long as investors see the rise and fall of the underlying index tracked by index funds, they can generally judge the changes in the net value of the index funds they invest in and how much profit or loss they have.
3. Reduce risks by fully diversifying investment.
Because index funds widely diversify their investments by tracking the index, the expected annualized expected return of their portfolios is basically consistent with the corresponding index, and the fluctuation of any individual stock will not have much impact on the overall performance of index funds, thus reducing the investment risk of investors as a whole.
4. The management process is less affected by human activities.
The investment management process of index funds is mainly a passive tracking process corresponding to the target index. In this way, the influence of human factors can be reduced through more programmed transactions in the management process.
Disadvantages of index funds:
The fluctuation is too big. For short-term operation, the risk is great. Any fund has risks, so investors should think carefully when buying it.
2. The risk of fund redemption. If you want to quit early, you have to sell at a low level, which is easy to lose money.
3. The fixed investment of the fund is not applicable in all cases, and the effect is very different.
4. Lead the rise but not resist the fall. In any market, the position of index funds is very high, and it is impossible to avoid the risk of the stock market through the operation of fund managers.
Risks of index funds:
Investment index funds can avoid some risks of timing errors by adopting fixed investment, but they can't avoid the risks brought by the market. For investors who hold index funds for a long time, they can only participate in the investment on the premise of understanding the risks and expected annualized expected returns of index funds.
But long-term investment is not without risks. The risk of long-term investment of stock funds lies in the long-term fundamentals of the stock market, which corresponds to the long-term profitability of listed companies and more directly reflects the economic trend. If the economy continues to decline, it is difficult for the stock market to have room to rise, and the effect of investing in index funds is similar.
In short, although fixed investment index funds can't completely avoid the risks in investment, fixed investment is an option for investors with weak timing ability or no time to take care of assets.