Many small partners know that the foundation will vote, and they also understand that the index fund will vote is the most effective and simple investment method for ordinary people. So, how many expected returns can index funds have? Frankly speaking, investing in the stock market depends on the future, and no one can predict the future. We can only give you a simple estimate. Please see below.

How much can a fixed investment index fund earn?

The expected return of index funds with low valuation comes from two parts, one part is the valuation difference of buying low and selling high, and the other part is the performance growth of listed companies during this period.

The valuation difference between buying low and selling high mainly brings short-term expected income, while long-term expected income depends on the profit growth of listed companies. According to the blue chip index of the market, blue chips are generally in the mature stage, and their growth is relatively average. It is estimated that the average growth rate in the next 10 year will be 8%- 10%.

If the economy is still prosperous, this figure can be increased to more than 10%. If the economy is depressed, the growth rate of the blue-chip index will be around 7%-8%. Due to the social goal of running a well-off society in an all-round way, the national GDP growth standard is also set at around 7%. Listed companies are the most profitable enterprises, and the growth rate of blue chip index is likely to exceed 7%.

In addition to profit growth, let's look at the valuation difference. Assuming that we insist on investing when the index is undervalued, the average buying cost can be leveled to 8 times PE, and it will be sold above 15 times PE in the future. Based on the growth rate of 7%, assuming that the target is completed within three years, the expected annual rate of return is about 35%; If the target is achieved within five years, the compound annual expected rate of return is about 24%.

According to the average cycle of A-shares in the past, a bull-bear conversion will be completed in about 5 to 7 years, so the annualized expected rate of return of fixed investment of low valuation index funds can be around 20% to 25%.

Well, I'll stop here about how much expected income the low valuation index fund can earn by fixed investment, hoping to help investors. Warm reminder, the fund is risky and needs to be cautious in investment.

Introduction reading:

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