After experiencing a record-breaking surge, with single-day transaction volumes breaking through 3.5 trillion yuan, A-shares are seeing a pullback today.

Despite the significant drop, from the perspective of market development, this pullback is necessary and can make the stock market's rise healthier. Compared to the previous frenzied bull market, a slow bull market may be more profitable for everyone.

However, the sharp fluctuations in the market still have a considerable psychological impact on investors.

Compared to the previous frenzy, the pullback has cooled everyone's emotions, prompting them to think about how to invest more steadily, how to better control risks, how to reduce transaction costs, and thus achieve better returns.

01

Why is it said that the ChiNext board still has opportunities after the pullback?

After the crazy surge, it's inevitable that there will be divergences in the subsequent trend, and capital will naturally choose to layout in the best way.

So the question arises, if the overall market returns to an upward trend, which indices are more likely to emerge?

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The ChiNext board, which focuses on technological innovation, will be one of the options.

Let's start with the most basic indicator - earnings growth.In the first half of this year, the 1,349 companies on the ChiNext board collectively achieved a total operating income of 1.86 trillion yuan, with nearly 60% of the companies seeing year-on-year growth in operating income. The overall growth rate was 3%, leading the Shanghai and Shenzhen stock markets (-2.33%, 0.57%). Among them, 273 companies achieved a performance growth rate of over 50%, and 173 companies saw their net profits double.

Since the second quarter, the operating performance of ChiNext companies has shown a significant improvement, with nearly 60% (59.01%) of the companies achieving a sequential increase in net profits in the second quarter, and 278 companies saw their net profits increase by more than 100% sequentially in the second quarter.

It is particularly worth mentioning that the overseas business of ChiNext companies is also growing steadily. In the first half of the year, listed companies achieved overseas sales of 350.536 billion yuan, a year-on-year increase of 7.67%, accounting for 18.84% of the total operating income, up from 18.02%. Among them, the overseas sales income of ChiNext companies in the electronics, communications, home appliances, basic chemical, machinery equipment, and computer industries (Shenwan first-level) increased by 48.06%, 106.39%, 26.56%, 17.48%, 15.33%, and 14.65% year-on-year, respectively.

In the entire A-share market, ChiNext companies remain representatives of high growth potential.

Secondly, in terms of returning value to investors, statistics show that so far this year, 156 ChiNext companies have introduced interim dividend plans, which is 2.79 times the number of companies at the same period last year. The declared dividend amount has reached a historical high of 14.988 billion yuan, a 213% increase compared to the same period last year.

At the same time, ChiNext companies have introduced a total of 314 repurchase plans this year, with a proposed repurchase amount ranging from 313.9 billion yuan to 626.3 billion yuan. A total of 109 companies have announced share increase plans by 312 shareholders.

It can be seen that ChiNext companies are actively responding to policies and gradually getting rid of the criticized issue of "high investment, low return."

In this round of rising market trends, the underweight of ChiNext was first identified by market funds, and the index has risen for three consecutive weeks, with the index recovering to 65% of its previous high.

Why can ChiNext achieve such performance?The most important reason is still its primary focus on innovative enterprises. Especially those enterprises that integrate new technologies, new industries, new business forms, and new models in traditional industries, such as information technology, biopharmaceuticals, new energy, new materials, etc. These industries represent the future development direction of China's economy and have broad market space and growth potential.

The latest data shows that among the 146 listed companies on the A-share market with a market value higher than 100 billion, 13 are listed on the ChiNext board. Among them, as the leader in the new energy industry, CATL's market value (131.63 billion) ranks eighth in the A-share market. Its production of power batteries has a global market share of over 30%, and its industry leadership is unparalleled; Mindray Medical, which develops and manufactures high-end medical equipment, Zhifei Biological, the leader in vaccine production, Inovance Technology, the leader in industrial automation, and Forchitech and New Easy, which produce key components for AI data centers - optical modules.

The high growth potential of ChiNext companies stems from their strong emphasis on R&D investment. In the first half of this year, the total R&D expenditure of ChiNext companies reached 88.989 billion yuan, a year-on-year increase of 3.53%, accounting for 4.78% of the total revenue, of which the proportion of strategic emerging industries is 5.89%, and 286 companies have a proportion greater than 10%, an increase of 22 companies compared to the same period last year.

Although the ChiNext index has risen a lot recently, from a valuation perspective, the PE of the ChiNext index is 38 times, located at the 25.05% historical percentile point, still at a relatively low historical position, and still has cost-effectiveness advantages.

We can also look forward to the ChiNext's re-emergence after this round of adjustments.

02

How to easily invest in the ChiNext board?Although the ChiNext board has investment value, the investment threshold is not low either.

Investing in the ChiNext board requires more than two years of stock investment experience and an average daily asset balance of 100,000 yuan in the 20 trading days before opening; the ChiNext board has many high-priced stocks, and a single lot of 100 shares can easily cost tens of thousands of yuan. Betting on a single stock not only carries uncontrollable risks but also occupies a large amount of capital position.

In comparison, ETFs offer better value for money, with a capital threshold as low as a few hundred yuan per hand.

At the same time, in terms of the scale of investable funds, ETFs can invest up to 95% of the fund's net assets in the constituent stocks of the target index, higher than other actively managed funds. This also makes ETFs more aggressive, especially in a bull market, where they can effectively capture high returns. And because they track an index, they are easier to control drawdowns compared to individual stocks during market corrections.

Overall, ETFs are investment tools that are both offensive and defensive, which is why they are favored by a wide range of investors, especially those with experience.

In this round of rising market trends, many ETFs have been snapped up, frequently hitting the upper limit, and after hitting the limit, they cannot be bought in the market, leading investors to rush to subscribe to ETF linked funds outside the market.

Of course, the market is currently in a period of correction after a crazy rise, with significant volatility, and investors need to be cautious, patient, and wait for volatility to decrease, the index to stabilize, and a clear signal of a new round of increases before entering the market. In terms of investment tools, choosing a stable ETF is better.

But with so many ChiNext ETFs, which one should you choose?

Under the same conditions, prioritize the one with the lowest fee rate.

Because the fee rate may seem insignificant to fund investors, but it actually plays a significant role.John Bogle, the father of index funds, once said: "Owning a low-cost index fund will ultimately defeat the vast majority of investment professionals."

Warren Buffett, the Oracle of Omaha, also made two classic statements about index funds.

One came from his 1993 letter to shareholders: "Through regular investment in index funds, amateur investors can actually outperform most professional investors."

The other came from his 2007 letter to shareholders: "I personally believe that the best choice for individual investors is to buy a low-cost index fund and maintain a consistent regular purchase over time."

Why do both of these investment titans have a preference for low-cost index funds?

Firstly, index funds have long-term investment value.

Buffett himself has practiced this. In 2008, he made a ten-year bet with another well-known investor, Ted Seides, which ended with the defeat of the five hedge funds of funds chosen by Seides against the S&P 500.

Another example is the Nevada Public Employees' Retirement System, which manages over ten billion dollars and for a long time was managed by a single Chief Investment Officer (CIO). However, because all investments were in index funds, one person easily outperformed the vast majority of investment managers.

Many well-known investors are loyal fans of index funds. They choose to invest in index funds for the long term and effortlessly enjoy the long-term, stable capital appreciation that these funds bring.

Secondly, since it is a long-term investment, the lower the cost, the better.Don't be fooled by the low fund rates; small amounts can accumulate over time, much like how grains of sand can build a tower. Even a rate of one-thousandth, when considered over the long term of a year, represents a significant cost, especially for investors with larger positions.

Moreover, index funds are a form of passive investment. How the market moves and how much it can rise is a function of the market itself, something not even the most skilled investors can control. For the same index fund, investors can opt for the one with the lowest fee rate, thereby minimizing transaction costs and maximizing profits.

03

The lowest fee rate for ChiNext ETF across the industry

Today, a fund company announced a fee reduction.

It is Huaxia Fund, which declared that the management fee rate for its ChiNext 100 ETF Huaxia (159957) and its associated funds (Class A: 006248, Class C: 006249) has been reduced from 0.50% to 0.15%, and the custody fee rate has been adjusted from 0.10% to 0.05%.

This sharp reduction by two-thirds directly sets a new industry-low standard.

For instance, with a one-million-yuan ETF position, one could save 4,000 yuan a year.

Friends who are interested in investing in ChiNext ETFs should pay attention to the ChiNext 100 ETF Huaxia (159957) with the industry's lowest fee rate, as well as its associated funds (Class A: 006248, Class C: 006249).