The English name of an Index Fund is Index Fund, which, as the name implies, is based on an index. At the same time, taking the constituent stocks of the index as the investment object, people can build a portfolio by buying all or part of the stocks of the index, so as to achieve the purpose of tracking the fund products represented by the underlying index.

Generally speaking, index funds aim at reducing the tracking error, and try to make the underlying index of the relevant region close to the changing trend of the portfolio, so as to obtain roughly the same rate of return as the underlying index.

There are four types of index funds. The first is the common open index fund. It cannot be traded, but it can be bought or redeemed. Second, closed-end index funds can be traded, but they cannot be purchased and redeemed. The third is the index ETF fund, which can be understood as a combination of the first two. It can be traded, purchased or redeemed in the form of portfolio securities. The fourth is the index LOF fund, which is similar to the third. It can be traded or purchased or redeemed, but the purchase or redemption does not need the form of portfolio securities. It can be seen that these four types are distinguished according to whether they can be traded, whether they can be redeemed and how they can be redeemed.

Index funds can be divided into two categories from another angle. The first category is index funds that are completely copied. This type of index fund generally uses all copied indexes. The second type is enhanced index fund, which means adding active investment strategy on the basis of passive investment.

When choosing, we should choose an index fund with good growth and small error, which can get more income than other index funds.