Although the index fund is very complicated, you can also find a suitable index fund through keywords such as fund type, tracking target, fund rate, enhanced index fund and tracking error.
Passive investment of quadruplets
Recognize it before you buy it
Index funds have quadruplets: ordinary index funds (some of which are LOF), enhanced index funds, ETF funds and ETF-linked funds. How to avoid being silly and confused?
The so-called index fund is a fund product that tracks the underlying index by investing in a basket of index components.
While strengthening the index fund, the goal is to keep up with the index, but also to strive to outperform the index, mainly "passive investment is the mainstay, supplemented by active investment." Generally, 80% of the positions are allocated according to the index, and the remaining 20% positions are actively managed in order to improve the income.
ETF is also an index fund, but it has one more function: an open-end fund that can be traded on the exchange. Investors can purchase and redeem a basket of stocks in the primary market, or use stock accounts to buy and sell in the secondary market. There are many ways to play. However, the threshold of the primary market is high, and ordinary investors usually invest in the secondary market.
The ETF-linked fund is actually to issue a fund to buy ETFs, so that citizens can buy and sell through banking channels.
There is also an ordinary index fund, LOF fund, which belongs to the cross-border. It can be purchased and redeemed in banks and other consignment channels, and can be traded on exchanges.
Pay attention to the rate difference
ETF fund rates are relatively low.
Index fund is a tool variety. In normal operation, when tracking index funds with the same index, the income difference will not be too big, so try to find products with low rates-you can earn less.
The main rates of the Fund include: management rate, sales service rate, custody rate, etc. In particular, it is necessary to compare the rate differences of index funds tracking the same index. Take the fund that tracks the CSI 500 Index as an example. At present, the management fees of index funds tracking the index are as low as 0.5%, while others are 0.75% and 1%. The charge of custody fee is different, 0.2%, and most of the others are 0. 1%. In terms of sales service fees, we can find that all ETF sales service fees are zero.
If the management fee, custody fee and sales service fee of index funds are combined into a comprehensive rate, the rates of these index funds tracking CSI 500 are actually very different, ranging from 0.6% to 1.75%, with a difference of 1. 15 percentage points. From the perspective of fund types, ETF funds and ETF-linked funds are basically with a comprehensive rate of 0.6%, and enhanced index funds are relatively high. The fund management fee rate of enhanced index funds is generally 1%, and that of standard index funds is 0.6%.
Please remember: when choosing index funds, products with stable scale and relatively low rates are preferred, especially fixed investment customers, which will save 0.5% every year, and there will be differences under the compound interest effect.
Tracking error is the most important.
It is very important to choose an index fund and see whether the fund can keep up with the index, that is, track the error.
The so-called tracking error is the distance between the performance of the index fund and the performance of the tracked index. Because of the purchase and redemption of the fund, the position cannot copy the index 100%, resulting in natural errors. Good fund managers will take some actions to make up for this natural defect. For example, through certain stock selection to improve income. But such small moves don't always work, so the income gap of index funds appears. The tracking error of index funds is the embodiment of management ability.
In fact, investors can choose products that outperform the index for a long time by browsing the websites of fund companies and fund research reports. In particular, if investors with fixed investment can outperform the index 1% every year, the compound interest accumulated in recent years will be far behind their peers.
Controlling tracking error is a basic goal of index fund. Generally, the tracking error of index funds is required to be within 3%~4%, and the daily average tracking error of index funds is also required to be less than 0.35%. Investors had better choose pure index funds with daily tracking error within 0.2% or annual tracking error within 1.5%. If the annual tracking error is within 1%, this index fund is excellent.
From a practical point of view, we need to pay attention to three points. First, the tracking error of index funds owned by large fund companies or some fund companies with quantitative advantages is small. This is mainly because fixed fees such as management fees and custody fees are also a reason that affects the tracking error, while large fund companies have stronger negotiation ability and often make breakthroughs in rates.
Second, the regular adjustment of index stocks will also have a greater impact on the tracking error, which reflects the management ability of fund companies. In addition, the index fund portfolio must also hold certain cash assets to cope with redemption. Relatively speaking, ETF funds applying for physical redemption in the primary market have certain advantages. Therefore, from the perspective of tracking error, ETF is the best.
Third, we need to pay attention to some extreme situations, and there will be errors. For example, a large influx of funds over a period of time will affect the income of index funds; For example, market fluctuation leads to the suspension of too many stocks, which also affects the operation of index funds, and then affects the tracking error of index funds. During the stock market crash and fuse of 20 15 and 20 16, many index funds have great tracking errors; Therefore, it is best to choose index funds with relatively stable scale and large scale.
Similar names
The constituent stocks may be very different.
Let's talk about why the returns of different index funds with the same theme are very different. This is actually the difference caused by tracking different indexes under the same theme.
Take the medical index fund as an example. At present, in addition to graded funds, there are 44 passive index funds in the name of "medicine". As of 12 and 13, the best rate of return in the past year has reached 10.52%, and the worst rate of return is-10.7 1%. The difference between the two.
In fact, this difference is mainly due to the different tracking indicators. For example, funds that track the Shanghai and Shenzhen 300 medical health index perform well, and the underlying indexes are mostly popular tracking stocks of medicine in the past year. The weak performance this year is the fund that tracks the biomedical index. Due to the leading profit during the epidemic last year, these stocks have been adjusted back to varying degrees this year. According to industry insiders, the number of industry index funds is increasing. Although they track the same industry, tracking different indexes will also lead to great differences in the final actual income. Investors should distinguish the constituent stocks, heavyweights and style characteristics of the underlying index before choosing.
Enhancement is a "double-edged sword"
There are many positive effects this year.
It is a "double-edged sword" to increase the function of index funds, which may increase the income, but it may also devour the income.
Enhanced index funds mainly refer to funds with passive investment as the mainstay and active investment as the supplement. Generally, 80% of the positions are allocated according to the index, and the remaining 20% positions are actively managed in order to improve the income. From the practical point of view, the last two years have been more positive.
The data shows that from 12 to 13, there were 202 enhanced index funds (all types are counted separately) included in the statistics in the past year, of which 176 products exceeded the benchmark, accounting for 87%. This is also one of the reasons for the difference in the yield of the same index fund. The data also shows that in the past year, there are 1 13 funds that outperform the benchmark by 5 percentage points (each type is counted separately), and many funds have obvious "excess returns" for a long time, which deserves special attention. However, there are also some enhanced index funds, which have not been enhanced in the past, but have lost performance. So buying enhanced index funds is also to prevent the income from being weakened.