By: Han Mei
Compiler: http://www.fundcn.org

With the increase in stamp duty, the Chinese stock market of BSE finally stopped frenzy further steps, beginning in high indexes sharply oscillation, Nearly 50% of shareholders have indicated a wish to base to the public, but this time, but it’s not easy days. especially those investing in the stock-type fund-people, or 2% today, and tomorrow rising 3%, the day when looked back. This is indicative of the change, profits were oscillation index has swallowed, then shouted, funds to make money is Burongyia! In fact, the current circumstances, the most important thing is to control the risk, then sound it is very important, For those seeking long-term investments, as well as the basic principles of sound public, the index fund is the best choice.

An index fund is for investors with access to the market average income is close to the investment return and the establishment of functional, or other similar in a stock market index fund, which proceeds with the current price of a certain index fluctuated, always maintain the current level of the average market gains, are not too high not too low, in general, it has the following advantages :

1, Scattered and preventing risks. On one hand, as the Index Fund widely scattered investment, Any individual stock volatility index fund will not have the overall performance impact that will spread risk; the other hand, Because index funds pegged to the index generally have a longer history of tracking, So to some extent the risk index fund is predictable.

2, Low cost. This is the most prominent Index Fund advantage. Index funds take hold strategy, not as stock-fund often did Convertible, management fees, transaction costs and marketing costs far lower than actively managed funds, the difference sometimes reached 1-3%. Although in absolute terms it is a very small figure, but because of the effect of compound interest exist, in a longer period of time since the results of the accumulated fund will have a tremendous impact on earnings.

3, Deferred taxes. Because index funds have taken a buy and hold strategy, the stock held by the stock exchange rate is very low, Only when a stock removed from the index, or the investors to redeem their investment requirements of the time, Index Fund will sell the equity and realize some capital gains, this one, The annual pay little capital gains tax, plus interest compounded effect of delayed tax would bring many benefits to investors. In particular, the cumulative years later, this effect will become more prominent.

4, Monitoring less. Because index funds do not have to operate proactively conduct investment decisions, So fund managers do not need to basically fund performance monitoring, Index fund managers is the main task of monitoring the corresponding index changes to ensure that the index fund portfolio composition with suitable.

Copyright Fund China 2008.

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