What is fixed fund investment?

Views 28KAug 9, 2023
What is fixed fund investment? -1

Key points

  • Fixed fund investment refers to investing a fixed amount of money into a fixed fund according to a fixed cycle

  • Fixed investment is suitable for moonshine workers, office workers, underprivileged investors, people with low risk appetite, or special financial needs in the future

  • Fixed investment can spread costs, smooth out risks, and reduce the trouble of choosing timing, but it is more suitable for falling and volatile markets

  • Not all funds are suitable for fixed investment. Fixed investment requires good planning, long-term investment, utilization strategies, and learning to stop profits

Detailed explanation of the concept

What is a fixed investment? In fact, paying for social security is a fixed investment. What about fixed fund investments? It means investing a fixed amount of money into a fixed fund according to a fixed cycle.

A fixed investment can help the Moonlight family accumulate wealth, save time and effort for office workers, and also help invest in Xiaobai to control feelings such as greed and fear.

Since fixed investment can smooth risk and pursue average returns, it is also suitable for people with low risk appetite and special financial needs (such as pension) at some point in the future.

The risk of fixed investment smoothness

“It's harder to accurately step into the market than catch a falling flying knife in the air.” Everyone wants to buy low and sell high, but no one can accurately predict highs and lows.

In order to avoid hitting the wrong point with a one-time investment, you can spread costs and smooth out risks through fixed investments. Moreover, when the fund falls, the share that can be bought for the same amount increases; when it goes higher, the opposite is true, so fixed investment can automatically increase when it is higher or lower.

Therefore, as long as the selected fund grows overall, investors can obtain a relatively average return, reducing the trouble of choosing the right time. However, a fixed investment may not necessarily make more money; it will perform better in a declining and volatile market.

If you fall first and then go up in a fixed investment, it will form a “smile curve.” In this market, let's say investor A only invests 40,000 yuan at the beginning, while investor B invests in 4 installments, investing 10,000 yuan each time. In the end, investor A may not make a profit, while investor B may reap a lot.

Investment tips

① Not all funds are suitable for fixed investment

Funds with a steady trend, such as bond funds, are more suitable for one-time investment. Fixed investment is suitable for funds that can run for a long time but have high volatility, such as stock funds and partial share hybrid funds. Among them, index funds are a good choice.

② Make a plan

Before making a fixed investment, you must set your own investment goals, sort out the financial situation, and then prepare a fixed investment plan based on risk preferences, including specific funds, start time, frequency, amount, and term.

For example, you can start a fixed investment when the price falls below value; the fixed investment amount is based on new income growth in the future; for fixed investments over 5 years, it doesn't matter if the volatility is slightly higher when choosing a fund.

The plan is not set in stone; it is necessary to adjust the plan in a timely manner according to changes in personal circumstances. But that doesn't mean you have to keep changing; you have to stick to it most of the time.

③ Long-term investments

If the investment time is too short, fixed investment smoothing risk has little effect. Therefore, once you start investing, don't worry about short-term ups and downs, don't stop fixed investments at will, don't switch products frequently, etc., and stick to long-term investments.

④ Utilization strategies

Using strategies on the basis of regular fixed investment may be more effective.

For example, regular irregular investments, reference moving averages, market capitalization, or valuations, etc., the lower the more you buy. In valuations, for example, you can invest more money when underestimating; the opposite is true when overestimating. You can also consider a portfolio of fixed investments to match different styles of funds according to cross-industry and cross-market perspectives.

⑤ Learn how to make a profit

“Apprentices are the ones who buy; the ones who sell are the masters.” There are many ways to take profit, such as taking a profit when you reach a certain rate of return, taking profit when overestimating, taking profit at expiration, etc. The one that suits you is the best one.

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.