1. Why do you need passive position adjustment?
Ordinary index funds sometimes have tracking errors, that is, the performance of index funds is different from that of indexes. This difference may come from liquidity, market size, stock rotation and other reasons. In order to minimize this error, fund managers need to passively adjust their positions to make their stocks as close as possible to the stock composition of the target index.
2. Under what circumstances do you need passive position adjustment?
In some special cases, index funds have plummeted or soared, which requires passive position adjustment. When the index fund increases too much, it may violate the basic principles of reasonable diversification and risk control in the fund investment plan, and then the fund manager needs to lighten up his position; When the index fund falls too much, some stocks may be undervalued, and the fund manager needs to increase the corresponding positions.
3. The impact of passive position adjustment on investors
For long-term investors, passive position adjustment has little effect, because the purpose of passive position adjustment is to make the index fund position close to the stock composition of the target index, thus reducing the tracking error. But for short-term investors, passive position adjustment may lead to price fluctuations of some stocks. Short-term investors should pay more attention to the timing of passive position adjustment in order to maximize their own income.
Generally speaking, the passive position adjustment of index funds is to pursue the basic principles of reasonable diversification and risk control in fund investment plans. Investors should choose index funds that meet their own needs according to their investment objectives and risk preferences, and reasonably choose their holding time according to market fluctuations. Short-term investors should pay more attention to the timing of passive position adjustment in order to maximize their own income.