Study fund, starting from here.

Views 15KAug 9, 2023

Fund: a tool to diversify investment

This course is reproduced from Morningstar and has been partially revised by Futu.

01 ordinary people can also find experts for financial management.

There's a new restaurant in town, and you're going to experience it with a delicious dream. If you go alone, you can only order a small number of dishes, and you can't experience more novel dishes, then one or two dishes also carry risks-they may not suit your taste and spoil your fun. What is the solution? It's best to share it with your friends. In fact, investment funds are somewhat similar.

As an investment tool, securities investment funds collect the funds of many investors, are entrusted by fund custodians (such as banks), managed and operated by professional fund management companies, and make profits by investing in securities such as stocks and bonds.

For individual investors, if you have 10,000 yuan to invest, but the amount is not enough to buy a series of different types of stocks and bonds, or you simply do not have the time and energy to choose stocks and bonds, buying a fund is a good choice.

For example, if you buy a fund, you will become the holder of the fund, and the above 10,000 yuan will be converted into a certain share of the fund unit after deducting the corresponding fees. The investments of all the holders together constitute the assets of the fund, and the professional team of the fund management company uses the fund assets to buy securities such as stocks and bonds to form a portfolio. The fund share you hold is the epitome of the above portfolio.

Expert financial management is an important feature of fund investment. Fund management companies equipped with investment experts, generally have a profound theoretical foundation of investment analysis and rich practical experience, with scientific methods to study stocks, bonds and other financial products, portfolio investment, to avoid risks.

Accordingly, every year, the fund management company will withdraw the management fee from the fund assets to cover the company's operating costs. On the other hand, the fund custodian will also withdraw the custody fee from the fund assets. In addition, open-end fund holders need to pay purchase fees, redemption fees and conversion fees directly, and closed-end fund holders have to pay transaction commission when buying and selling fund units.

* Note: open-end funds and closed-end funds are explained below.

02 at a glance to explore a variety of fund types

According to the organizational form, there are two types of corporate funds and contractual funds. At present, domestic funds are all contractual.

According to whether the scale of the fund is fixed, it can be divided into closed-end fund and open-end fund. The total amount of closed-end funds issued shall be determined in advance, and the total number of fund units shall remain unchanged during the closed-end period. Investors can transfer and buy and sell funds through the stock market (exchange) after the fund is listed. The total amount of funds issued by open-end funds is not fixed, and the total number of fund units increases or decreases at any time. Investors can apply for or redeem fund units at specified places (such as bank counters) according to the net value of the fund.

According to the different investment objects, it can be divided into stock fund, bond fund, allocation fund, money market fund, futures fund, option fund and so on.

According to the characteristics of investment operation, it can be divided into growth fund, income fund and balanced fund.

03 recognize these five key points before investing

Many investors tend to confuse funds with other financial products, so they need to pay attention to the following points:

① funds are not stocks

Some investors confuse funds with stocks, but they are not. On the one hand, investors only entrust fund management companies to invest in stocks, bonds and other securities, and buy stocks to become shareholders of listed companies. On the other hand, if the fund invests in a large number of stocks, it can effectively disperse the risk and the income is relatively stable, while the single stock investment often can not fully disperse the risk, so the income fluctuates greatly and the risk is larger.

② fund is different from savings.

As open-end funds are sold through banks, many investors think that funds are not much different from bank deposits. In fact, there is an essential difference between the two: savings deposits represent the credit of commercial banks, the principal is guaranteed, the interest rate is fixed, and there is basically no risk; while funds invest in the securities market, they have to bear the investment risk. Interest income from savings deposits is fixed, while investment funds have the opportunity to share the gains from the rise in the underlying stock and bond markets.

③ funds are different from bonds.

Bonds are credit-debt relationship documents that agree to repay principal and interest on time. Domestic bonds include treasury bonds, corporate bonds and financial bonds, and individual investors cannot buy financial bonds. The national debt has no credit risk, and the interest is tax-free; the interest on corporate bonds is high, but it has to pay 20% interest tax, and there is a certain credit risk. In contrast, the returns of funds that mainly invest in stocks are not fixed and the risk is relatively high, while bond funds that only invest in bonds can make use of portfolio investment to improve the stability of returns and spread the risk.

④ funds are risky.

Investment funds are risky. In other words, the 10,000 yuan you originally used to buy the fund is likely to lose money. As described above, since the fund invests in securities, it has to bear the investment risk of the underlying stock market and bond market. Of course, with the exception of capital preservation funds that have a clear guarantee principal clause in the prospectus. In addition, when the open-end fund has a huge redemption or suspension of redemption, the holder will face the risk of cash difficulties.

⑤ fund is suitable for long-term investment.

Some investors hold the mentality of winning short-term spreads in the stock market, such as frequently buying and selling open-end funds, which often ends in disappointment. Because, on the one hand, the purchase fees and redemption fees add up to not low, and on the other hand, the fluctuation of the net value of the fund is far less than that of stocks. The fund is suitable for long-term investment with stable returns and low-risk funds.

Disclaimer: The above content does not constitute any act of financial product marketing, investment offer, or financial advice. Before making any investment decision, investors should consider the risk factors related to investment products based on their own circumstances and consult professional investment advisors where necessary.

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