After selecting an index, how do we choose the right index fund? We then need to pick a specific target. For example, if we choose the CSI 300, we can opt for a regular index fund like Bosera CSI 300 or a more enhanced version like Fullgoal CSI 300 Enhanced.
So, which one should we choose? It depends on which one tracks the index better and has stronger excess return capabilities. Fullgoal’s index tracking is slightly better, with a 0.01% lower tracking error than Bosera.
Looking at the 1-5 year returns, Fullgoal also leads. Its 1-year, 2-year, 3-year, and 5-year returns all outperform Bosera. In terms of annual gains and losses, Fullgoal’s excess return capability compared to the CSI 300 index is quite outstanding.
Except for underperforming the CSI 300 by about 4 percentage points in 2014, Fullgoal has consistently outperformed the index—losing less during downturns and gaining more during rallies. Since 2018, the CSI 300 has fallen by 21.42%, while Fullgoal only dropped by 13.11%, compared to Bosera’s 17.84% decline.
If we choose the CSI 300, we must pick a fund from the many index funds that can consistently generate higher returns for us. Here, Fullgoal CSI 300 Enhanced is undoubtedly the better choice.
In the long run, the CSI 300 index experiences fluctuations of around ±30% in each major cycle. If you follow the index with a buy-low-sell-high strategy over time, the returns can be quite good. Roughly speaking, the long-term average annualized return exceeds 15%, approaching 20%. This level already surpasses many retail investors trading stocks directly and even outperforms many star stock funds.
An index reflects the price trends of a basket of stocks, so there’s no market manipulation or individual stock "black swan" risks, nor concerns about delisting. Thus, its movements reflect the natural state of the market, making it the only type of asset that fits the assumptions of standard technical analysis.
Since indices rarely experience sudden spikes or drops—and even if they do, reverse candlesticks quickly smooth them out—their moving averages are relatively smooth and patterns clear. You can use the simplest moving average system or Bollinger Bands to trade them. However, for index trading, it’s best to use relatively longer timeframes, such as the 20-day and 60-day moving averages.
In summary, which index fund is worth investing in depends first on our risk preference—whether we seek stability or higher returns. Next, we should consider valuation; if it’s too high, it may not be a good investment. Finally, from the selected index-tracking funds, we should pick the one that consistently delivers higher returns to serve our needs.
