Buffett once said that an index fund with fixed investment, a little white who knows nothing, can also beat professional investors. So, how to choose an index fund? Let's talk about it below.

There are two ways to choose an index fund: the first step is to choose an index and the second step is to choose a fund.

First, choose the index.

Generally speaking, indices are divided into two categories, broad-based indices and narrow-based indices. The former has a wide range of constituent stocks, generally without industry and subject matter restrictions, such as the Shanghai and Shenzhen 300 Index and the CSI 500 Index; The latter mainly invests in a single industry or theme, such as securities index and bank index.

For Xiaobai, it is more appropriate to choose a broad-based index, because the broad-based index has a wide coverage and scattered risks, while the components of industry index or theme index are concentrated in a certain industry, with relatively high risks, which is more suitable for experienced investors to buy.

In addition, whether it is a broad-based index or an industry index, it is more appropriate to choose a low-valued index to buy. To see whether an index is undervalued, we can refer to the historical price-earnings ratio of the index. When the index is at a relatively low level between the highest and lowest values in history, it can be considered that the index is undervalued.

Second, choose the fund.

Selecting index funds can start from three aspects, tracking error, scale and investment cost. Index funds pursue the replication index, and their performance is determined by the index. After choosing an index, choose an index fund with low tracking error.

Generally speaking, the daily tracking error of index funds is within, and excellent index funds can reduce the error to within, and the annual tracking error to within. You can filter according to this standard.

As for the scale, the larger the fund, the better its liquidity, and there is no risk of liquidation, nor is it afraid that no one will change hands. Finally, the investment cost. The expenses of index funds are mainly redemption fees and management fees. OTC index funds can pay attention to the buying channels with low redemption fees, while OTC index funds can pay attention to index funds with low management fees.

Well, that's enough about how to choose index funds, I hope it will help you. Warm reminder, financial management is risky and investment needs to be cautious.