How to choose index funds?

Index funds have always been hot, and the topic of domestic and foreign markets has not diminished. As the main investment product in mature markets, it can not only eliminate systemic risks, but also reduce investment costs. So how should index funds be chosen? Start from these points.

How to choose index funds?

1 understand the composition of the index and the corresponding market.

Each index fund has its own characteristics, and its rate of return is different at different market stages. If you mainly want to share economic growth through index funds and obtain average market returns, you can choose index funds that completely copy the market.

2 Look at the size of the fund

A fund with a small scale has certain uncertainties, such as large redemption has a great impact on the fund, while a fund with a large scale will pull up relatively slowly, but it has certain advantages in income. The smaller the index fund, the greater the risk of liquidation. Although liquidation does not mean that the investment will never come back, the institution will redeem it according to the net value of the fund on a certain day and return the investment money to the investors. This process is very troublesome and is likely to cause losses.

3 cognitive index evaluation

The most important thing for investment index funds is to choose an undervalued tracking index, that is, to buy when the P/B ratio is low, so that the income range will be larger. On this basis, it is best to choose a fund that has been established for a long time and has good historical returns. After all, its past performance is also representative.

Buying an index mainly follows the income of the whole market, and the expected income is best not to be too high. And if you want to choose more index funds just to diversify risks, it is unnecessary, because the index funds themselves are already diversifying risks.