A GEM index fund is a type of fund. What is a GEM index fund? How to choose a GEM index fund? Learn more about fund knowledge below.

As the name suggests, a GEM index fund is a fund product that tracks a specific index (such as the CSI 300 Index, S&P 500 Index, Nasdaq 100 Index, Nikkei 225 Index, etc.) as its benchmark. It uses the index's constituent stocks as investment targets, constructing an investment portfolio by purchasing all or part of these constituent stocks to track the performance of the benchmark index. Generally, index funds aim to minimize tracking errors, ensuring that the portfolio's trend aligns with the benchmark index, thereby achieving a return rate roughly similar to that of the benchmark index.

Generally, when considering how to buy a GEM index fund, the first thing to look at is the fund size. It is commonly believed that the larger the GEM index fund, the better. Of course, this is not absolute. It doesn’t mean you must choose the largest GEM index fund, but all else being equal, it is advisable to prioritize larger funds.

Second, look at the fund’s establishment time. There is a saying in the industry: “A fund that hasn’t experienced bull and bear markets is not a good fund.” Funds that have withstood market crashes and still survived demonstrate strong market adaptability. The natural law of survival of the fittest also applies to the fund investment market. Therefore, when considering how to buy and choose a GEM fund, the earlier the fund was established, the more worthy it is of consideration and ownership.

In addition to the “two perspectives” mentioned above, if you want to determine which GEM index fund is better, you need to refer to the following three principles:

1. Do not choose funds that cannot fully track the GEM index. Some funds select a few or dozens of GEM stocks to form an ETF. Strictly speaking, these are not index funds. Unless managed by experienced and capable fund managers, they are not recommended.

2. Do not choose on-market ETF funds. Many people may not understand this. Didn’t you say on-market funds have lower fees? Don’t worry, people may have different understandings of how to buy and choose GEM funds, but from a fixed investment perspective, on-market funds require manual investment, and their fee advantage is more suitable for large purchases. For fixed investments, on-market ETF funds are not very cost-effective.

3. Do not choose leveraged or structured funds. Typically, these Class A and Class B leveraged funds do not fully track the GEM index and are prone to significant volatility. They are not suitable for investors with low risk tolerance and are not ideal for fixed investments.