What Is Index Investing?
The so-called index investment is to copy the index to form a stock portfolio as an asset allocation method, and to minimize the tracking error between the combination return and the index return as the performance evaluation standard. Its characteristics and advantages are the diversification of investment risks, low investment costs, the pursuit of long-term returns and the transparency of investment portfolios.
Index investment
Right!
- The so-called index investment is to copy the index to form a stock portfolio as
- The so-called index investment is to copy the index to form a stock portfolio as
- As a passive investment method, the fundamental difference between indexed investment and active investment is that it invests entirely according to the combination of index sample stocks. The fund manager does not choose stocks but gives the right to choose stocks to the index preparation mechanism. However, from another perspective, the right to ultimately choose stocks is not actually handed over to the index compiling agency, but essentially to the market. The most popular and recognized index in the market, stock selection is usually based on market value and liquidity. Under the transparent index selection criteria, the stock combination of stocks entering and leaving the index sample is actually the result of comprehensive market forces, and it is the "invisible hand" at work. In this sense, the core idea of choosing a broad-based index with a high market value coverage is to passively share market returns (beta) and bear market risk, which is similar to the Taoist philosophy in traditional Chinese philosophy, that is, " Taoism is natural "," doing nothing but doing nothing ".