How Do I Choose the Best China Index Fund?

Index Fund (Index Fund), as the name implies, is a specific index (such as the Shanghai and Shenzhen 300 Index, S & P 500 Index, Nasdaq 100 Index, Nikkei 225 Index, etc.) as the underlying index, and the constituent stocks of the index as investment Objects, by purchasing all or part of the constituent stocks of the index to build an investment portfolio to track the performance of the underlying index's fund products.

Index funds

Index funds are based on specific indices ^[1]

There are more and more index funds in the market, and it is becoming more and more difficult to choose index funds. Investors need to pay attention to two points when selecting index funds: On the one hand, choose funds that track better-growing indexes to find such funds. The difficulty of an index is no less than selecting stocks; on the other hand, selecting index funds with a smaller tracking error. The smaller the tracking error, the better the fund manager's management ability and the better the investor can achieve the index return .

According to data from the Galaxy Securities Fund Research Center, as of the end of April 2012, there were 133 standard index funds and 24 enhanced index funds in the domestic fund market, which is unprecedented. Faced with a large number of index funds, how should investors choose?

1.Focus on the strength of fund companies--funds first

When choosing any fund, the strength of the fund company should be the first factor that investors pay attention to, and index funds are no exception. Although index funds are passive investments and operate relatively simply, tracking the underlying index is also a complex process that requires precise calculations and rigorous operating procedures. Stronger fund companies can often track the underlying index more closely.

2.Focus on fund expenses-cost wins

Compared with active management funds, one of the advantages of index funds is that they have low fees. However, the degree of "low" fees for different index funds is different. It is necessary to minimize investment costs. Of course, it should be noted that lower fees are important, but the premise is the good return of the fund. Don't blindly choose the index fund in pursuit of lower fees.

3.Focus on the underlying index-top priority

The core of an index fund is the index it tracks. Therefore, when selecting an index fund, it is important to understand the market it corresponds to. In addition, investors can also invest in different index funds to achieve the purpose of asset allocation.

There are many types of indexes in the domestic market at present, which can be described as "a hundred flowers blooming and a hundred schools of thought contending". Different index covers different markets with different risk-return characteristics. For example, the SSE 180 and SZSE 100 indexes reflect the Shanghai and Shenzhen markets; The 100 and small and medium board indices reflect the situation of large-cap blue-chip enterprises and SMEs in the Shanghai and Shenzhen markets; even with the introduction of cross-border ETFs, it is also good to choose Shanghai and Shenzhen 300 index funds and funds that invest in overseas market indices. The direction of asset allocation can play a role in diversifying investment and risk to a certain extent.

^[2]

The investment operation of the index fund is a process of tracking the index by purchasing the constituent stocks (or other securities) of the index, which mainly includes position opening, reinvestment, and tracking adjustment. The specific operation process can be summarized into the following aspects:

Index funds are constructed in accordance with the principle of securities price index compilation

Index funds are based on the principle of fitting the target index and tracking changes in the target index.

An index fund is a fund that constructs an investment portfolio for securities investment in accordance with the principle of the compilation of securities price indexes. In theory, the operation method of an index fund is simple, as long as the corresponding proportion of securities is purchased according to the proportion of each type of securities in the index, it can be held for a long time.

For a purely passively managed index fund, the fund

First, choose the index, that is, the index that investors want to invest in. For investors who want to make long-term investments through the index, the investment method can choose regular investment, and mainstream index funds with strong representation;

Second, look at the rates. Generally speaking, the rates of ETFs and index LOFs are relatively low.

Third, look at the exponential fit;

Fourth, look at transaction costs and convenience.

For investors, there are two channels for purchasing index funds: one is to purchase index funds through their own bank account, OTC fund purchase of stock accounts or fund companies; and the other is to purchase index funds in the secondary market through stock accounts . The former refers to over-the-counter funds, and the latter refers to on-premises funds, which are limited to the purchase of index funds such as index LOF and ETF listed on the exchange.

The United States is the most developed Western country for index funds. Pioneer Group pioneered the creation of the first index fund in the United States in 1976-the Pioneer 500 Index Fund. The generation of index funds,

Index funds originate in the United States and have grown primarily in the United States. The world's first index fund appeared in the United States in 1971. It was an index fund product launched by Wells Fargo Bank to institutional investors. At the time, it caused far more opposition than support and support. By the late 1970s, there were some annuity funds, including

On March 22, 2010, Cathay Pacific s first overseas index fund

Castrol Shenzhen Fundamental Fundamental 120 Index Fund (listed for trading) and its linked funds will be publicly raised from July 1, 2011 to July 26, 2011. Investors can subscribe to the Shenzhen Fundamental 120 Index Fund through the three subscription methods of online cash, offline cash, and offline stocks through the Harvest Fund Direct Sales Center and major securities dealers, and its connected funds can choose not only the Harvest Fund Direct Sales Center and online trading You can also subscribe through major banks and securities firms such as the Bank of China, ICBC, and Agricultural Bank of China. The timely launch of new products of this index provides a richer and professional configuration platform for investors who are optimistic about fundamentals for a long time.

It is reported that, as an open index product that can be traded on the market, Castrol SZSE Fundamentals 120 follows the principle of tracking the SSE Fundamentals 120 Index, and follows a passive indexing investment method and investment philosophy. The composition and weight of the constituent stocks of the SZSE Fundamental 120 Index to build the fund's stock portfolio. Strive to provide investors with a transparent management and lower cost of the underlying index investment tools, in pursuit of tracking deviation and tracking errors to minimize.

According to public information, the Shenzhen Stock Fundamental Fundamental 120 Index Index includes the top 120 stocks in the Shenzhen Fundamental Fundamental Index. It has the characteristics of high market representativeness, high industry concentration, and high component stock concentration. New choice of index.

The core of the operation of the index fund is to passively track the index to obtain the average return of the market while fully diversifying individual stock risks. For the majority of investors, it has the following advantages:

First, the cost is relatively low. This is arguably one of the most prominent advantages of index funds. Because the index fund adopts an investment tracking strategy, the fund manager does not need to spend a lot of time and energy to choose the types of investment instruments such as stocks and bonds, and the timing of buying and selling, which reduces it to a certain extent. Fund management costs. On the other hand, because index funds generally adopt a buy and hold strategy, they generally do not make frequent adjustments to investment portfolios, and only make corresponding adjustments when the constituents of the tracked index change, so Its transaction costs will also be lower than those of other active investment funds.

Second, reduce risk through adequate diversification. Since the index fund makes extensive diversified investments by tracking the index, the return of its investment portfolio is basically the same as the return of the corresponding index. The fluctuation of any single stock will not have a great impact on the overall performance of the index fund. Overall reduces investor investment risk. Therefore, index fund investors do not have to worry about the impact of sharp declines in individual stocks on fund returns.

Third, transparency of performance is high. As long as the investors see the rise and fall of the target index tracked by the index fund, they can roughly judge the change in the net value of the index fund they invest in. And for some investors who are good at judging the trend, but not very confident about individual stocks, they are particularly suitable for investing in index funds, thereby avoiding the trouble of making an index but not making money.

Fourth, the management process is less affected by humans. The investment management process of index funds is mainly a process of passive tracking of the corresponding target index, rather than frequent active investment. In this way, the influence of human factors can be reduced through a more programmatic transaction in the management process.

Investors can buy more index funds, such as SSE 50ETF, Harvest

An index fund is a fund that is based on the principle of fitting a target index and tracking changes in the target index to achieve synchronous growth with the market. The investment of the index fund adopts an investment strategy that fits the target index's return rate, and invests in the constituent stocks of the target index.

The United States is the most developed Western country for index funds. Pioneer Group pioneered the creation of the first index fund in the United States in 1976-the Pioneer 500 Index Fund. The emergence of index funds, the United States stock market has more than 400 index funds, and each year is growing at a rapid rate, the latest and most exciting index fund products are exchange-traded funds (ETFs). Today in the United States, the types of index funds include not only a broad range of U.S. equity index funds, U.S. industry index funds, global and international index funds, bond index funds, but also growth, leveraged, and reverse index funds. Exchange-traded funds are A newly developed index fund.

The rapid development of index funds in China's securities market benefits from the aforementioned advantages unique to the fund. In June 2002, the SSE 180 Index was launched in the SSE only six months ago, and the Shenzhen Stock Exchange also launched the SSE 100 Index. After that, the first domestic index fund, the Hua'an SSE 180 Index Enhanced Securities Investment Fund, was launched. In early 2003, another fund that closely tracked the trend of the SSE 180 Index, Tiantong SSE 180 Index Fund, was also issued. However, the development of index funds in China has not been smooth. In order to avoid systemic risks and individual stock investment risks, China's optimized index funds have adopted different operating principles from foreign index funds. The main differences are as follows: Managers of domestic optimized index funds can adjust indexed positions based on the judgment of the trend of the index, and in the process of subjective stock selection, use the advantages of research and financial analysis to prevent some riskier Individual stocks enter the portfolio. In the indexed investment section, Fund Xinghe and Jingfu tracked the SSE A-Share Composite Index, and Fund Pufeng tracked the Shenzhen A-Share Composite Index. Judging from the actual operation results of this type of fund, the performance is not satisfactory. To explore the reasons, there are not only the shortcomings of the Chinese securities market itself, but also the operational reasons of fund companies. Nevertheless, index funds have become a favorite financial instrument for many investors. With the continuous improvement of China's securities market and the booming development of the fund industry, it is believed that index funds will have great development potential in China.

1. Little affected by human factors.
2. Low rates. The general stock fund purchase and redemption fee rate is 1-1.5%, while the index fund is 0.5-1.2%.
3. Passive tracking index personal financial calculator is very intuitive. Also suitable for short-term band operation.
4. Long-term investment has low risks and excellent returns.

1. The fluctuation is too big. For short-term operations, the risks are significant.
2, led the rise but not resistant. In any market, index funds have high positions, and the risk of the stock market cannot be avoided by the operation of fund managers.
3. Risk of fund redemption. If you want to exit early, you have to sell at a low level, and it is easy to lose money.
4. Fund fixed investment is not applicable in all cases, and the effect varies widely.