Market Notes
系列：Fund Strategy

How to pick a quality index fund

Pick a quality broad-based index: tenure > 5 years, sustained new highs Broad-based (CSI 300 etc.) · tenure > 5 yrs Hot new index: pops at launch then falls Index funds ≠ risk-free: broad-based are long-validated and keep making new highs; chasing hot new indices risks "buying at the launch top".
Figure: A broad-based index (purple, tenure > 5y, sustained new highs) vs a hot new index (grey dashed, pops at launch then falls) — prefer the former, avoid the latter.

The index funds we discuss here mean broad-based ones, e.g. CSI 300, ChiNext.

When investing in index funds we must be clear: index funds are not risk-free.

Many institutions, when explaining index-fund investing, invoke Buffett’s words to frame index funds as “low-risk, care-free, steady-money”.

Sure, in US markets (e.g. Nasdaq 100, S&P 500) that may hold over the long run.

But regrettably our own market is not like that — index funds here differ wildly.

To lower risk and respect history, we give two standards for picking indices:

Two standards for picking an index ① Tenure > 5 years Stands long-cycle time validation, avoids "launch-is-the-top" new indices. ✓ don't chase short-term hype ② Many sustained new highs Only if it rises over the long cycle does it deserve long-term investment. ✓ long-term upwardness Both standards point to "respect history, lower risk" — index funds carry risk too, so pick the best of the best. Note: A-share indices differ wildly; don't import the US "low-risk, care-free" narrative.
Figure: Two hard standards for a quality broad-based index — tenure over 5 years (time validation) + many sustained new highs (long-term upwardness).

First, tenure over 5 years

We temporarily ignore hot indices launched recently.

The reason: look at the market hype when each index launched — index providers now literally build an index for whatever is hot! They launch it, it pops, then collapses with no rhyme or reason!

Exaggerating, a new index listing is almost like a new stock IPO!

Second, number of sustained new highs

The indices we prefer still need long-term upwardness; only if they rise over the long cycle do they truly deserve long-term investment.

⚠️ This article is a methodological framework for illustration only and does not constitute any investment or trading advice. Markets carry risk; decisions require caution.

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