Is Shandong A Niu Zhitou reliable? What are the advantages and disadvantages of the Fundamental Index?

The fundamental index is based on the fundamental financial data of the stock company's net assets, cash flow and other fundamental financial data for sample stocks and index weighted calculation, which breaks the connection between the price of the sample stock and its weight, so that the stocks with large fundamental economy scale obtain higher weights, and to a certain extent, the phenomenon of overvalued stocks being overweighted in the portfolio is too high. So what are the advantages and disadvantages of the fundamental index?

The cause of the fundamental index

The traditional index design based on market capitalization as the basis for portfolio weighting, because it is not an efficient investment tool for investors, when the market price of stocks is not efficient, the traditional index will be distorted, thus promoting the birth of fundamental indexes.

Advantages of fundamental indices

1. Fundamental indexes overcome the shortcomings of traditional market capitalization weighting so that the factors are not affected by market value fluctuations, so that the truly fair value of each stock can be discerned.

2. The fundamental index has a higher expected return and a safer level of risk.

3. In addition to the above advantages over mainstream indices, some indices also have good expected returns, value and growth characteristics, as well as appropriate liquidity levels.

4. Relying on the fundamental index can analyze the operating level of listed companies and the macro performance of the market.

Disadvantages of the Fundamental Index

As an index, its own value will be reduced, and the degree of flexibility and benefit enhancement will be weaker.