Core Viewpoint - The article emphasizes the importance of percentile as a reference indicator when investing in index funds, suggesting that low percentile investments may present potential opportunities [1][6]. Summary by Sections Percentile Types - There are two types of percentiles: 1. **Time Percentile**: Indicates the current valuation's position within historical valuations over a specific time frame. For example, if the current valuation is lower than 90% of the valuations in the last five years, it is at the 10th percentile [3]. 2. **Space Percentile**: Represents the current valuation's position between the historical minimum and maximum valuations. For instance, if the historical minimum P/E ratio is 10 and the maximum is 50, a current P/E of 20 would place it at the 25th percentile [4]. Practical Investment Considerations - Time percentiles are more commonly used in actual investments, but relying solely on percentiles carries risks [5]. Risks of Relying Solely on Percentiles - **Risk 1**: Short index launch time can lead to low historical valuation reference value. For example, newly established indices may not provide a reliable bottom valuation due to limited historical data [9][10]. - **Risk 2**: Changes in index rules can significantly alter valuation data. For instance, the change in the China Securities 100 index from a market-cap-based selection to a leading strategy can affect historical valuation references [12][13]. - **Risk 3**: Different weighting algorithms for valuations can lead to changes in percentiles. For example, the China Securities Dividend Index's shift from market-cap weighting to dividend yield weighting has resulted in discrepancies in reported P/E ratios [14][18]. - **Risk 4**: Significant fluctuations in earnings can cause P/E percentiles to become misleading. For instance, if a company's earnings surge, the P/E ratio may appear low, creating a "value trap" scenario [20][21]. Conclusion - Investments with low percentiles are worth researching, but low percentiles do not guarantee undervaluation. Factors such as short historical data, changes in index rules, different valuation algorithms, and earnings volatility can lead to percentile failures, necessitating a detailed analysis of each situation [25][26].