Small business opportunity

Index funds means in accordance with certain criteria constitute index to purchase the stock market index which includes all or part of the securities the fund, and its aim is to achieve the same with the index level of return.

For example, the Shanghai Composite Index Fund’s objective is to acquire and the Shanghai Stock Exchange composite index, like the proceeds from Shanghai Composite Index Fund in accordance with the Shanghai Composite Index, the composition and weights’s purchase index stocks, accordingly, the Shanghai Composite Index fund’s performance will be like Shanghai Composite Index, the same fluctuations .

Index funds most prominent feature is the low cost and delay tax, both to the Fund will have a great impact on earnings. Moreover, such an advantage in a longer period of time is even more pronounced. In addition, the simplification of investment portfolio fund managers will need to make frequent contact with agents, they do not have stock options or the identification of market timing.

Specifically, the index of the main characteristics of the Fund’s performance in the following areas :

One, low-cost index fund is the most prominent advantage. Expenses including management fees, transaction costs and cost of sales in three aspects. Management fees is the fund manager for the investment management costs; Transaction costs refers to the sale of the securities broker commission transaction costs. Because index funds take hold strategy, not regular stock, which cost far less than actively managed funds, the difference sometimes reaches 1% -3%, although the absolute amount from the point of view this is a very small number, but the effect of compound interest exists, in a longer period cumulative results of the Fund will have a tremendous impact on earnings.

Two disperse and ward off risks one hand, the index fund widely diversified investment, any individual stock volatility index fund will not have the overall performance impact that will spread the risks. Another aspect, as index funds pegged to the index generally have a longer history of the track, therefore, to a certain extent, the risk index fund is predictable.

3, deferred taxes as index funds have taken a buy and hold strategy, the stock held by the 2.80, is very low, only when a stock removed from the index, or the redemption request of investors, index funds will sell the stock holders realize some capital gains, annual payments of capital gains tax (in the United States and other developed countries, the capital gains tax is derived from the scope of) little, coupled with the effect of compound interest on the deferred tax would bring many benefits to investors, particularly in the light of years later, this effect will become more prominent.

4, less because of operational monitoring index funds do not have to take the initiative in the investment decision-making, so the fund managers of the Fund is basically no need to monitor the performance. Index fund manager’s main task is to monitor the corresponding index changes to ensure that the index fund portfolio constitute adapt it.