What are the advantages of index funds-Private placement network

Passive funds generally choose a certain index as the tracking object, so they are also called index funds. Unlike actively managed funds that determine investment targets based on the judgment of fund managers, index funds track the index by purchasing all or part of its constituent stocks. So, the performance of actively managed funds is closely related to the individual stocks that the fund holds heavily. The performance of index funds is closely related to the overall trend of the economy, as well as the trends of specific industries or sectors.
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Compared to active funds, index funds have higher predictability and lower risk coefficients. Why? Because stocks are backed by listed companies, but the uncertainty of the development of listed companies is still high. If one is optimistic about a stock, the listed company may break out in a fraud scandal or experience a significant decline in performance, and the uncertainty of such investments is relatively high.
Correspondingly, actively managed funds require fund managers to have research on the industry, listed companies, and stock market style transformation in order to avoid pitfalls and buy high-quality stocks. Index funds correspond more to the overall or local development of the stock market, rather than investing in a small number of individual stocks. Therefore, as long as China's economic development is not a problem and supported by economic fundamentals, the overall stock market will also rise in the long run.
For index funds, this is advantageous, and long-term investment in index funds is also a matter of certainty. Looking at historical data, the returns of index funds are not low. Taking the Shanghai Composite Index as an example,1991year7month15Starting from today, real-time release will begin, and the basis for release is100Points.2017year7month15It's Saturday, so we use7month14The closing price of the day3222.42To calculate26Revenue for the year. stay26During the year, the Shanghai Composite Index became the original32More than twice, the average annual annualized return is approximately14.3%,This profit is quite high.
Another advantage of index funds is that their fees are lower than those of actively managed funds. After all, index funds have almost no requirements for the fund manager's ability to select stocks and timing, and only need to replicate the index. Therefore, the management fee of index funds is generally about 1% lower than that of active funds, and the custody fee is also about 1.5% lower. Furthermore, due to the fact that the adjustments of index constituent stocks are made on a quarterly or semi annual basis, and each adjustment often does not exceed that of all constituent stocks10%。
Therefore, the position of index funds is relatively stable. This means that the trading frequency of index funds is relatively low, and most stocks are just bought and held. It should be noted that every stock transaction comes with a cost, and for each stock transaction, index funds need to pay a proportionate commission to securities firms and stamp duty. In terms of transaction costs, index funds can also save a lot of money. The lower the cost, the higher our actual return on investment.