The difference between index funds and active funds
With people's increasing attention to investment and financial management, fund investment has become an increasingly popular way. In the fund market, index funds and active funds are two common types of funds. They each have their own characteristics, advantages and disadvantages. Let's discuss their differences.
1. Definition
Index fund refers to a passive fund in which the fund manager makes a portfolio according to a specific proportion of index stocks in order to track the performance of the index. Active funds are different from index funds. Fund managers invest according to their own investment strategies, and pursue a rate of return that exceeds the market average through active investment strategies.
2. Investment strategy
The investment strategy of index funds is passive, and the goal is to track a specific index, such as the Shanghai and Shenzhen 300 Index and the Shanghai 50 Index. In the portfolio, the fund manager distributes the shares according to the weight proportion of the index constituent stocks, so as to achieve the investment income basically consistent with the index performance. In contrast, the investment strategy of active funds is proactive, and fund managers will choose different investment targets, investment opportunities and investment strategies according to their own research and analysis in order to seek a rate of return that exceeds the market average.
3. Income performance
Because of different investment strategies, the return performance of index funds and active funds is also different. The return performance of index funds is usually basically consistent with the market index, which is stable but relatively low. The performance of active funds is more flexible. Some funds exceed the market average, but some funds that make mistakes in investment are not as good as index funds.