Since the Industrial and Commercial Bank of China (ICBC) launched regular fund investment services in 2005, this "lazy man's wealth management method" has been increasingly accepted by ordinary investors. Currently, according to incomplete statistics, there are over 60 funds available for regular investment across various banks, including actively managed equity funds, index funds, hybrid funds, bond funds, and money market funds. For long-term investors, which type of fund is most suitable for regular investment? The answer is: index funds! Here are four reasons why.

Index Funds Perform Better in the Long Run

A key rationale for regular fund investment is to average out risks and lower the average cost, without worrying about short-term market fluctuations. Hybrid funds, due to their bond allocations, have lower volatility than equity funds, while bond funds are even less volatile. Therefore, neither is the best choice for regular investment. Instead, equity funds with higher elasticity are more suitable.

Since regular fund investment typically focuses on the long term, investors should choose long-term outperformers among equity funds rather than settling for short-term gains over three to five years.

Among equity funds, passively managed index funds are more suitable for regular investment. Warren Buffett wrote in Berkshire Hathaway's 2004 annual report: "Low-cost index funds might be the most profitable tool for investors over the past 35 years, but most investors endure emotional highs and lows because they don’t choose these effortless and cost-effective funds, resulting in mediocre or poor performance." John Bogle, founder of Vanguard Group, the second-largest fund company in the U.S., found that over the 35 years ending in 1997, more than three-quarters of actively managed funds underperformed the S&P 500 index. In the long run, index funds outperform 70% of actively managed equity funds, making them an excellent choice for regular investment.

Index Funds Are More Reliable

Just like choosing a life partner, investors naturally hope their long-term fund can be trusted for life. Unfortunately, domestic fund managers change frequently, and choosing an actively managed equity fund for regular investment is like dating a "playboy."

Statistics show that as of May this year, the average tenure of open-ended equity fund managers was only 14.59 months. This means that for a 15-year regular investment plan, investors must prepare for at least 10 manager changes. For actively managed equity funds, the manager plays a decisive role, and frequent changes in management style can force investors to endure constant "infidelity" in their fund's strategy.

In contrast, index funds passively track an index, minimizing the manager’s influence. Their consistent style allows investors to hold them with peace of mind. Additionally, since index funds passively follow an index, there are no capacity constraints, unlike some actively managed funds that may suspend subscriptions and halt regular investments.

Index Funds Are Even Better in a Bull Market

With the deepening of share-trading reforms and China's steady economic growth, the country's stock market has entered a healthy development phase, confirming a long-term bull trend. The rationale for preferring index funds in a bull market is simple: actively managed funds often struggle to accurately capture market trends, while passive index funds inherently benefit from the market's upward momentum.

According to Galaxy Securities Fund Research Center, in 2006, index funds outperformed all other categories, with an average net value growth rate of 125.87%, compared to 121.41% for actively managed equity funds, 112.48% for hybrid equity funds, and 108.89% for balanced funds.

As of August 3, index funds achieved a year-to-date net value growth rate of 110.66%, while actively managed equity funds, hybrid equity funds, and balanced funds posted 97.33%, 92.93%, and 84.26%, respectively.

Currently, mainstream domestic research institutions believe that due to factors like China's economic growth, RMB appreciation, the Olympics, and demographic dividends, major A-share market indices will continue rising over the next two years. Now is an excellent time to invest in index funds.

Empirical Evidence for Regular Index Fund Investment

In January 2005, ICBC launched regular investment services for six funds, including Rongtong Shenzhen 100 Index Fund, Huaan China A-Share, GF Jufu, Southern Stable Growth Fund, SYWG BNP Paribas Shengli Selection, and Guolian An Desheng Stable. If investors had regularly invested in these six funds since then, by August this year, the Rongtong Shenzhen 100 Index Fund would have delivered the highest return at 244.44%.

It is reported that Rongtong China 100 Index Fund, a sister fund to Rongtong Shenzhen 100 Index Fund, has been included in ICBC's third batch of regular investment funds, giving investors another option. Moreover, those who sign up before September 30 will enjoy a fee discount of at least 20%.