Is index fund suitable for long-term holding?
Generally speaking, fund investment is suitable for long-term holding, whether it is an index fund or an active fund. Why do you say that? Take index funds as an example. Stock index fund is a combination of a bunch of stocks, followed by a bunch of listed companies.
The source of the stock price rise is the improvement of the performance of listed companies, followed by the improvement of stock valuation, that is, Mr. Market gave a higher quotation. There is a saying that the stock market is a voting machine in the short term and a weighing machine in the long term. This weight is the performance of listed companies.
Stock valuation is a vote given by all investors in the market. It is impossible for a fairy to predict the short-term fluctuation of stock price, but it is relatively simple to evaluate the performance of listed companies. Therefore, if investment index funds want to make money, they must wait patiently for the performance growth of listed companies. This process can't be completed in a short time.
For index funds, it often contains a dozen or hundreds of stocks. The purpose of this is to diversify investment within a certain range according to the rules of constituent stocks and avoid the risk of individual stocks.
In essence, indexes are very different from stocks. A listed company cannot exist forever, but the index can eliminate bad stocks and increase good stocks according to the index rules, thus maintaining the durability of the index. As long as the index bought by investors is a good index, the listed company is a good company and the price is not expensive, the index fund is suitable for long-term holding.