What is a good asset? For ordinary investors, the most important thing is to invest in a long-term upward market. If the target we choose is upward in the long term, even if there are some fluctuations during the period, the probability of investment returns is still big.

Because it is difficult for us to know how long this "long-term investment" is, we need to allocate it. In the holding process, the fluctuations always affect our mentality and our holding time.

Why is "index fund" a good asset?

The selection of index funds is very strict. The best index fund in the United States is the NASDAQ 100 Index. The 100 listed companies in the NASDAQ 100 index must be among the top 100 non-financial companies. The average daily trading volume of stocks must exceed 200000 stocks. And the listing time needs to reach 2 years.

It is very difficult for ordinary investors to choose good assets by choosing their own stocks. Is there a better way to help us hold the company's equity and enjoy the results of long-term enterprise and economic development?

The answer is "index fund".

An index fund is a fund that purchases a basket of company stocks. By buying an index fund, you can buy the stocks of many companies and share the growth income of these companies.

William Bernstein, a famous financial scholar, has calculated that since 1926 all investment returns in the US stock market had come from the 1000 stocks with the best performance. The number of these stocks only accounts for 4% of all listed companies.

If we want to find good assets for long-term investment and improve our long-term yield, we must invest in these companies. However, it is very difficult and the probability is very low to find these few leading companies from thousands of companies. Therefore, when we buy index funds, in addition to diversifying risks, it is more important to capture these good companies that can bring long-term returns.

If you are interested in a company or you have a deep understanding of some industries due to work or other reasons, you must buy some stocks that you are familiar with. At the beginning, they may be index funds, accounting for more than 80% of your investment account. When you have the ability to choose stocks, you can adjust the proportion gradually.

The index fund is a good asset. An important principle is that the index fund we choose should be able to represent a country's GDP (gross domestic product) as much as possible, which is the total wealth created by a country over a period of time.

For most ordinary investors, good assets can form their own asset portfolio. The goal is to cover the national economy and ensure a long-term upward portfolio. At the same time, ensuring a balanced allocation can help us hold it for a long time. On this basis, we can also get better returns through index enhanced funds and active funds, but this way requires more energy and deeper researches.

（Writer：Tommy）