What are Index Enhanced Funds? Characteristics of Index Enhanced Funds

Index funds are an investment tool that Warren Buffett has introduced to the average person many times and are suitable for long-term fixed investments. Many people often see index enhanced funds when choosing index fund products. Then, what is the index enhanced fund? Today, we are here to tell you a little bit about it, please see below.

What is an index-enhanced fund?

Index-enhanced funds are a type of index fund, which is a little different from ordinary index funds: most index funds fully track the performance of the index, the fund manager does not have to choose stocks or timing (directly in accordance with the index of the constituent stocks investment, the index adjusts the constituent stocks, the index fund and then follow the adjustment). The index enhancement fund allows fund managers to invest in stocks other than the index constituent stocks in order to pursue excess expected returns, but the investment ratio shall not exceed 20% of non-cash assets.

Index-enhanced funds, simply put, are indexed investment-based, supplemented by active management by the fund manager. Its expected return is divided into two parts, one is to replicate the index part of the expected return, and the other part is based on the selection of stocks to obtain the excess expected return. Each index-enhanced fund, through different ways of timing or stock selection, to do better than the index performance, to achieve excess expected return.

Is an index enhanced fund "enhanced"? So, if you want to make a fixed investment in index funds, index-enhanced funds may be a better choice.