Among the stock funds, there is a special kind, which is the only one that Warren Buffett has introduced many times in public, that is, index funds. This lesson will introduce you to this powerful investment tool.
First of all, let's understand what is an index? In fact, the index is very simple, which is a weighted average. It is used to reflect an average level of the market. We often come across the concept of index in our daily life. For example, the average score of a class and the average age of a city can reflect the average level of a certain aspect, which is the role of index.
So who developed the stock index? This stock index is not created out of thin air. There are two main types of institutions that develop stock indexes: stock exchanges and index companies. There are three major index series in China, such as the Shanghai Stock Exchange index series developed by Shanghai Stock Exchange and the Shenzhen Stock Exchange index series developed by Shenzhen Stock Exchange. These are the indexes developed by the Exchange. In addition, there is also a China Securities Index Company. He has developed a series of China Securities Index, which belongs to the index developed by index companies. The same is true in foreign countries. Like the United States, there are three major indexes: NASDAQ, S&P 500 and Dow Jones. The NASDAQ index is an exchange index, while the S&P 500 and Dow Jones index are developed by index companies.
After talking about indexes, let's talk about what is an index fund? The fund will invest in various assets, and the stock fund will invest in stocks. The stock index selects a basket of stocks according to certain rules. If a fund company develops a product according to the stock index, it will buy a basket of stocks according to the proportion of the constituent stocks of the index. Then this index fund can copy the trend of the stock index. This is index fund. Index is a mathematical formula, but it needs fund companies to turn it into a financial product that can be bought and sold. When we invest in index funds, because different fund companies have different strengths, we usually choose the products of these fund companies that have been operating for a long time and are more experienced.
We have already understood the concept of index fund. It seems to be plain, that is, take an average value and then buy a basket of stocks. Why does Buffett still praise index funds so much? This is because index funds have many unique advantages. It has three main benefits.
