1. What are the advantages of index funds?
1. Diversification: Index funds usually track a target index, such as the CSI 300 index fund, which tracks the CSI 300 index. The CSI 300 Index is composed of 300 representative stocks with large scale and good liquidity in the Shanghai and Shenzhen stock exchanges. The CSI 500 Index Fund tracks the CSI 500 Index, which is composed of the top 500 stocks in terms of total market capitalization after excluding the sample of the CSI 300 Index and the top 300 stocks in terms of average daily total market capitalization in the past year.
The meaning of "tracking" here means that the fund not only buys some stocks in the index, but buys all the stocks included in the index according to the proportion of the constituent stocks in the index, and adjusts the position according to the changes in the constituent stocks in the index, so as to maintain a relatively small range of "deviation" from the index, thus providing us with a diversified investment method.
2. Low cost: Since index funds are passively managed, their management fees and operating costs are usually lower than those of actively managed funds, which means that we can enjoy lower fees.
3. High transparency: The portfolio of an index fund is usually highly consistent with the index it tracks, and we can clearly know which assets the fund holds. Generally, the information of the constituent stocks of public funds is usually disclosed in quarterly reports and annual reports, but because index funds track the underlying index, the constituent stocks of the index can be queried in real time. Therefore, we can judge the holdings of the constituent stocks of the fund according to the constituent stocks and performance of the index.
4. Easy to invest: Since the index fund carries out decentralized passive investment, one investment is an industry, a theme, a region, etc., so when we invest through the index fund, we can reduce the research on individual stocks, and more from the industry, theme and other larger perspectives for investment analysis, for novice investors with weak individual stock research and analysis ability, it is easier to get started.
5. Easy to compare: Since the performance of index funds is directly linked to the performance of the public index they track, this provides us with a clear and objective benchmark, which allows us to easily compare key indicators such as tracking error, risk-return characteristics and past performance of different index funds through public data, so as to make more rational investment choices.
6. Suitable for long-term investment: Index funds not only reduce the transaction costs caused by frequent portfolio adjustments due to short-term market fluctuations, but also reduce the risks caused by errors in active management decisions, allowing investors to focus more on long-term capital appreciation and compound interest effects.
7. Direct replication strategy or flexible strategy: index funds are not only simple "copying" strategies, some index enhancement funds not only have the advantages of the above indexes, but also fund managers can also use a variety of strategies to enhance returns, such as selectively adjusting the weight of certain stocks, using financial derivatives for hedging or using market timing to adjust. For example, the CSI 300 Enhanced Index Fund, on the basis of tracking the CSI 300 Index, can also increase the subjective initiative of some fund managers, so that the Index Enhanced Fund has the opportunity to obtain higher returns when maintaining a similar investment direction to the benchmark index.
Second, the advantages of index funds for asset allocation
1. Rich variety, which can meet our different asset allocation needs
Index funds cover a wide range of types from broad-based to narrow-based indices, from industry indices to thematic indices, from domestic indices to international indices, providing us with a wide range of options. Whether you're looking for a market-average return or looking to focus on growth in a specific industry or region, you'll find the right product in an index fund. This diversity allows us to build and adjust our asset allocation strategy based on our risk appetite, investment objectives and market views, and to achieve global and diversified investments.
2. The position is relatively clear and transparent
As mentioned above, we can understand the specific holdings through the index tracked by the index fund, so the holdings of the index fund are relatively transparent and open. We can get a clearer picture of the specific assets and weightings held by the fund.
This transparency helps us monitor the composition of our portfolio and ensure that it aligns with our asset allocation strategy.
3. The style is clear and the rules are clear
Each index usually determines its own style, direction, frequency and rules of rebalancing when compiling, and does not depend on the will of the market or individuals. Correspondingly, the investment style of index funds is relatively stable and does not change frequently due to the personal judgment of the fund manager, which provides a relatively reliable basis for long-term investment.
4. Low configuration cost
The management fees and transaction costs of index funds are generally lower than those of actively managed funds. John Borg, the father of index funds, also emphasized: "Cost is the 'winner or loser' of long-term returns". Lower costs mean we can retain more returns, and this difference can significantly impact the overall performance of the portfolio over time.
5. It is convenient to "backtrack" historical performance
The performance of many new funds and sub-new fund products is not long enough, and it is difficult to summarize the style characteristics of the products from the short-term historical performance. However, for new or sub-new index funds, it is possible to "look back" at the historical performance of the index, many of which have a long-term track record of market performance, which can provide us with valuable insights. In addition, the performance of index funds also reflects the overall trend of the market and the long-term growth potential of specific industries, providing a valuable reference for asset allocation.
Overall, index funds, with their wide variety, stable style, low cost and ease of historical performance, make them ideal tools for diversification and effective asset allocation, helping to achieve long-term investment goals and optimize the performance of the overall portfolio.
3. How to make regular investment in funds?
For many friends, fund investment has become a popular investment method because of its long-term and convenient nature. However, even with regular investment, the ups and downs of the market are not always smooth sailing. So, in this complex and volatile market, how can we use some strategies and methods to optimize our fund investment plan in order to achieve better investment results? Next, let's explore some strategies that can help us invest in regular funds.
1. Moving average fixed investment strategy
The moving average investment strategy is a dynamic investment method based on the trend of the securities market index, and its core idea is to adjust the investment amount according to the changes in the market index. The implementation of this strategy usually relies on the judgment of the market trend, and determines the amount of the fixed investment by setting a specific moving average (such as a moving average) as a reference. Specifically, this strategy requires us to invest at fixed intervals (e.g., monthly or weekly), but the amount of investment is adjusted according to the position of the index relative to a specific moving average.
When a market index is above the moving average, this is usually seen as a sign that the market is overheating, and we may reduce the amount we invest, as it is more expensive and riskier to buy. When the market index is below the moving average, this may indicate that the market is overly depressed, and we increase our investment to buy more assets at a lower price, which may lead to higher returns in the long run.
The advantage of this strategy is that it combines the discipline of regular investing with the flexibility of market dynamics. By increasing investment at market lows and decreasing investment at highs, we can not only spread the cost of long-term investments, but also reduce the impact of market volatility to some extent. Long-term adherence to the use of the moving average fixed investment strategy can improve investment efficiency to a certain extent and seek better investment returns in market fluctuations.
Of course, the moving average fixed investment strategy also requires us to have a certain understanding of the market trend, including the selection of the moving average, the judgment of the market cycle, etc. In addition, this strategy is not necessarily effective, and short-term market fluctuations are difficult to predict.
2. Valuation fixed investment strategy
The valuation investment strategy is an automatic investment method based on the market valuation level, which requires us to pay close attention to the valuation status of the index and determine our investment behavior according to the valuation.
At the heart of this strategy is to take advantage of irrational fluctuations in the market. Increase the amount of regular investment when the market is undervalued, and reduce the amount of regular investment when the valuation is reasonable or overvalued, so as to reduce the overall position valuation, so as to reduce investment risk and investment cost.
Specifically, when implementing a valuation strategy, we will first determine one or more valuation indicators, such as price-to-earnings ratio, price-to-book ratio or dividend yield, to measure the valuation level of the index. When the valuation indicator of an index falls below a pre-defined threshold, indicating that the market may be undervalued, we increase our investment amount and buy more shares of the fund. Such an operation can help us accumulate more assets when the price is lower, so that we can make greater gains when the market recovers.
On the contrary, when the valuation indicator of the index is above a certain threshold, or enters the non-low valuation range, we will reduce the fixed investment amount to avoid buying at high valuation and reduce the potential downside risk. This strategy helps us to remain cautious when the market is overvalued and avoid large losses due to market corrections.
The advantage of valuation strategy is that it combines the concept of value investment with the discipline of regular investment. By actively buying when the market is down, and being cautious when the market is high, this can not only reduce investment costs, but also avoid the risk of market volatility to a certain extent. However, this strategy also requires us to have a deep understanding and accurate judgment of market valuations, as well as a keen insight into market sentiment and macroeconomic environment.
3. Average cost fixed investment method
Average Cost Investing is an intelligent investment strategy that responds to market fluctuations by dynamically adjusting the investment amount. This strategy is based on a simple principle: market volatility gives us the opportunity to buy the same asset at different prices, and by increasing the buying power when the price is lower, we can dilute the cost over the long term and increase the potential returns of the portfolio.
When implementing the average cost method, we will set a benchmark, which is the average cost of holding a position. This is usually calculated based on the average cost of our past investments. We then adjust the amount of each investment based on the relative change in the fund's current net value and this average holding cost.
If the net value of the fund is lower than the average holding cost, it means that the market provides an opportunity to buy at a lower price, and the amount can be increased for regular investment; On the contrary, if the net value of the fund rises and is higher than the average holding cost, you can choose to reduce the investment quota to control the investment rhythm and avoid buying too many assets at a high price.
The advantage of the average cost method is its flexibility and adaptability to market fluctuations. It is more suitable for use in the volatile market, but it is not suitable for the unilateral rise and unilateral decline of the market, which requires us to have a certain judgment ability on the market when using, and be able to adjust the investment plan in time to adapt to market changes.
The purpose of the above three methods is to buy more assets at a lower cost and buy less when they are more "expensive", so as to reduce the average holding cost and improve investment efficiency. It is more suitable for a volatile market, which can help us obtain dividends from market volatility and, to a certain extent, reduce the overall risk of the portfolio by reducing the cost of holding positions.
We may feel uneasy in the face of market volatility, but it's time like this when it's important to stick to our regular investment plan. The shock market is not a flood of beasts, when we choose the right "open way", it can also be "100 steel into finger soft", as long as we do not give up easily, I believe that after a well-thought-out strategy and the accumulation of time, we will be able to achieve the "goal" we ultimately want.
Risk Warning: Investors should fully understand the difference between regular fixed investment and lump sum deposit and withdrawal of funds. Regular investment is a simple and easy way to guide investors to make long-term investments and average investment costs. However, regular investment does not avoid the inherent risks of fund investment, does not guarantee investors to obtain returns, and is not an equivalent financial management method to replace savings.
The market is risky and investors should be cautious. This opinion represents the views of the current time only, may change in the future, is for reference only, does not constitute investment advice or guarantee, and is not intended as any legal document. When investing in the funds managed by the Company, investors should carefully read the Fund Contract, Custody Agreement, Prospectus, Risk Statement, Fund Product Key Facts Statement and other documents and relevant announcements, truthfully fill in or update personal information, check their own risk tolerance, and choose fund products that match their risk identification ability and risk tolerance. Investors need to be aware that there are circumstances in which the investment in the fund may result in the loss of principal. The fund manager undertakes to manage and use the fund assets in good faith, diligence and responsibility, but does not guarantee that the fund will be profitable, nor does it guarantee a minimum return. The performance of other funds managed by the fund manager is not indicative of the performance of the fund. Past performance and net worth of a fund are not indicative of future performance. The fund manager reminds investors of the principle of "buyer's responsibility" in fund investment, and after making investment decisions, investors shall bear the investment risks caused by changes in the operation status of the fund and the net value of the fund. The mainland fund has been in operation for a relatively short period of time and does not reflect all stages of the development of the stock market.