Summary: Perhaps also suitable for ordinary investors' long-term approach

Since August, the A-share market has seen continuous positive developments: on August 13, the combined daily trading volume of Shanghai, Shenzhen, and Beijing stock exchanges returned to 2 trillion yuan for the first time in nearly six months; on August 18, the Shanghai Composite Index's total market capitalization broke through the 100 trillion yuan mark for the first time; on August 22, the Shanghai Composite Index broke through 3,800 points at closing, reaching a new high in nearly a decade.

While being excited about the heated market conditions, some investors may find themselves in a dilemma: watching indices climb continuously, they fear missing out if they don't enter the market promptly, but when they decide to buy in, they discover that while "opportunities seem everywhere," "making profits isn't easy." As investment sentiment continues to rise, perhaps we should calmly consider what would be a more suitable strategy for most of us.

Rather than chasing hot topics, focus on core fundamentals

Looking back at the market's previous major upward trends, whether it was the "coal flying and non-ferrous metals dancing" of 2007, the "Internet+" of 2015, the "three golden flowers" of pharmaceuticals, consumer goods, and new energy in 2020-2021, or the AI wave in the first half of 2023, each market rally seems to have been accompanied by explosive growth in certain "main theme sectors," becoming the core engine driving market enthusiasm and carrying capital consensus.

However, as A-share investment targets become increasingly diverse, the characteristics of market structural differentiation and accelerated style rotation have become more pronounced, making it increasingly difficult to accurately identify main themes. Taking the 2025 market performance as an example, catalyzed by policies encouraging technological innovation and industrial upgrading, from DeepSeek and artificial intelligence at the beginning of the year to semiconductor domestic substitution, robotics, and innovative drugs in the second quarter, subdivided sectors under the technology growth theme have risen and fallen in succession. On the other hand, against the backdrop of unclear economic recovery expectations in the first half of the year, defensive assets with high dividends and low valuations also welcomed a rebound.

The dual characteristics of "rapid theme rotation + internal sector differentiation" mean that even if we bet on the right direction, we might still miss the main trend due to target selection bias or timing misjudgment. More critically, our judgment of main themes is often the result of hindsight analysis. We only realize this after the market has completed a full cycle, but by then it may be too late to intervene, having already missed the optimal positioning window.

This is particularly evident in the early stages of market rallies.

Guosen Securities pointed out that "markets in early upward phases are often accompanied by high-speed industry rotation, and the faster the industry rotation, the harder it becomes to capture through main theme thinking." From their calculated data, during the four upward market periods in early 2015, early 2019, Q3 2022, and September 2024, A-share industry rotation indices fluctuated significantly, maintaining wide fluctuations until July this year, which somewhat confirms that relying solely on chasing themes and industry rotation for investment does indeed face certain challenges.

Chart: A-share Industry Rotation Index and Wind All-A Index Trends

So, is there a method that is not only simple to operate but also helps avoid missing out?

Broad-based ETFs that focus on key points and core fundamentals might be a suitable solution for most people—

First, A-share's current broad-based system is mainly constructed based on index market capitalization tiers. By choosing broad-based indices, we can simplify relatively complex market movements into rough judgments about market cap style (such as large vs. small cap, value vs. growth) rotation trends, helping us reduce interference from numerous industry theme sectors and lower decision-making difficulty.

Second, popular main theme sectors may often achieve rapid valuation increases under "Davis Double Play," but once performance or development prospects fall short of expectations, they may face greater pullback pressure subsequently. In contrast, broad-based indices, due to their constituent stocks spanning multiple sectors, mostly have broad market representativeness, with some core broad-based index constituents representing China's quality assets. They not only have relatively stable fundamentals but also benefit from internal industry rotation effects that help reduce overall index volatility and diversify investment risks.

For example, since the "924" market rally in 2024, Wind data shows that the CSI 300 Index's maximum drawdown was only -15.67%, while among the 31 Shenwan Level-1 industries during the same period, 23 industries had maximum drawdowns exceeding -16%.

Additionally, broad-based ETFs have clear style positioning, transparent investment directions, and strong representativeness, helping us capture overall market opportunities as much as possible. In terms of trading mechanisms, on-exchange broad-based ETFs can be bought and sold in real-time like stocks, and those with corresponding feeder fund products also facilitate off-exchange investors without stock accounts, providing higher liquidity and allowing us to adjust positions according to market changes at any time, improving capital efficiency.

In summary, when we always feel like we're missing market opportunities, perhaps we haven't grasped the right investment direction or rhythm. In the long-term investment game, rather than predicting and chasing the next trend, we might as well use broad-based ETFs to construct investment portfolios.

Basic options also have diverse combination strategies

The current A-share market has formed a relatively rich and complete broad-based index system based on scale categories. Different broad-based indices have their own characteristics due to different construction rules and represented investment styles, with varying risk-return characteristics. When investing, we can try to select target indices with better constituent quality that match our own risk preferences.

For example, the well-known CSI 300 Index and CSI A500 Index select constituent stocks based on market capitalization or industry screening, without industry or theme bias, providing balanced and broad coverage of A-share core assets. They are suitable as core holding assets for long-term investment, helping to comprehensively capture A-share overall positioning opportunities.

If you have certain risk tolerance and want to enhance aggressiveness, consider focusing on broad-based indices in high-elasticity sectors with 20% price limit restrictions, such as STAR Market series indices, ChiNext series indices, and dual-innovation related indices.

If you're not satisfied with only allocating to A-shares, you can also look at the Hong Kong stock market, which has relatively strong asset complementarity. The Hong Kong Stock Connect 50 Index, which balances traditional Hong Kong stock leaders with emerging economy champions, is also worth attention.

Everyone can choose corresponding broad-based indices based on their investment goals and preferences. After determining the target index, priority can be given to larger-scale ETF funds. Fund scale reflects market recognition on one hand and ensures good trading activity on the other, potentially better handling impacts from large redemptions.

For the three types of broad-based indices mentioned above, here are corresponding investment tools for reference—

1. CSI 300 ETF (510300) | Feeder Fund: Class A 460300 / Class C 006131

Currently the largest ETF in the A-share market by scale, with the latest fund size reaching 418.2 billion yuan as of August 25. The target CSI 300 Index, with 5.54% of listed companies, contributes 54.82%, 80.97%, and 75.29% of A-share total market value, net profit attributable to parent company, and total cash dividends respectively. Constituent stocks have outstanding quality and significant leading effects.

Additionally, over the past decade, the proportion of emerging industries such as electrical equipment, electronics, and biomedicine among index constituents has continuously increased, adequately reflecting China's economic structural transformation. It may be one of the advantageous varieties for investors to capture A-share core assets. With this round of market recovery, the CSI 300 Index closed at its highest point since July 6, 2022, on August 25.

With scale and liquidity advantages, CSI 300 ETF (510300) continues to be a popular choice for market allocation of core broad-based indices. As of the end of 2024, CSI 300 ETF (510300) had over 792,900 holders, not only creating a new high since its inception but also being the only ETF tracking the CSI 300 Index with over 700,000 holders during the same period, deeply favored by investors.

2. A500 ETF Huatai-PineBridge (563360) | Feeder Fund: Class A 022438 / Class C 022439

The market's first and currently largest CSI A500 ETF in its category, with the latest fund size of 21.1 billion yuan as of August 25. The target CSI A500 Index, as a new-generation broad-based benchmark, prioritizes selecting securities with larger free-float market capitalizations in tertiary industries, emphasizing the importance of subdivided industry leaders while innovatively incorporating ESG evaluation and Stock Connect screening standards, forming differentiated positioning from existing broad-based indices and multi-dimensionally depicting the overall performance of core assets during China's economic transformation.

Unlike traditional broad-based indices with higher financial and real estate sector weights, the CSI A500 Index is rich in "new" content. Constituent stock weight sectors broadly cover industrials (21.60%), information technology (16.41%), materials (10.49%), healthcare (8.15%), and other high-growth sectors, with new economy-related industries accounting for over 60% of total weight, expected to continue benefiting from broad growth prospects in new economy fields.

According to Wind data, as of the close on August 25, the CSI A500 Index reached a new high since July 11, 2022.

3. STAR Market ETF (588090) | Feeder Fund: Class A 011610 / Class C 011611

The market's first ETF tracking the STAR 50 Index, with constituent stocks highly focused on the semiconductor industry. According to Shenwan Level-2 industry classification, semiconductors account for 60.64% of the weight, with the top five weighted stocks being SMIC, Cambricon-U, Hygon Information, Montage Technology, and Advanced Micro-Fabrication Equipment, all leading stocks with outstanding R&D capabilities in the semiconductor industry.

Catalyzed by favorable developments in semiconductors, artificial intelligence, and other fields since the second quarter of this year, Wind data shows the STAR 50 Index reached a new high since February 1, 2022.

4. Hong Kong Stock Connect 50 ETF (513550)

The market's first ETF tracking the Hong Kong Stock Connect 50 Index, with top five weighted stocks being Tencent Holdings, HSBC Holdings, Alibaba-W, China Construction Bank, and Xiaomi Group-W. It includes both large-cap leaders from traditional financial industries and representative new economy giants in Hong Kong stocks, serving as an important allocation option for capturing growth opportunities among Hong Kong's new economy leaders.

Benefiting from the index constituents' broad and balanced coverage of quality cores across various Hong Kong stock sectors, as of the close on August 25, the Hong Kong Stock Connect 50 Index also reached a new four-year high.

Under multiple positive expectations including domestic economic recovery, liquidity improvement, and capital market system optimization, China's core assets are gradually showing increasingly clear investment value. In this process, quality core broad-based indices that can better reflect overall economic performance may still be worth long-term attention.

Finally, here are two investment considerations to note.

First, when using broad-based ETFs for asset allocation, try to ensure low correlation with other assets to avoid affecting risk diversification due to overly similar investment styles. Second, broad-based ETFs are more suitable for long-term holding; frequent operations not only easily increase trading costs but may even lead to "reverse timing."

Risk Warning: Funds carry risks; investment requires caution.

MACD golden cross signal formation, these stocks show good upward momentum!