Funds can generally be divided into monetary funds, bond funds and stock funds. Different fund varieties are suitable for different asset management. So what is a bond fund? Is there any risk in investing in bond funds? Here is a brief explanation for you.
Bond funds are funds that mainly invest in bonds. They generally agree on terms and yields, also known as "fixed income varieties". Bond funds mainly invest in fixed income financial instruments such as government bonds, credit bonds and corporate bonds. Generally, bond funds hold more than 80% of bonds.
Comparison between bond funds and monetary funds:
The monetary fund can be regarded as a substitute for cash, because it can be used whenever you take it. It is very convenient to use. Even when we shop, we can use the monetary fund to make payments.
Bond funds cannot be used at any time. They can be seen as a substitute for fixed deposits, but bond funds do not promise returns and have no clear term.
Comparison between bond funds and bank financing:
Many bank financial management are linked to a bond fund, but there is a certain investment threshold for bank financial management, which is generally more than 50000 yuan.
The investment threshold of bond funds is relatively low, only tens or even hundreds of dollars are needed to invest, and ordinary people can also invest through bond funds.
Comparison between bond funds and index funds:
Index funds invest in stocks, which are volatile and do not guarantee capital.
Bond funds are also non capital guaranteed, but their volatility is small.
So where is the specific positioning of using bond funds? That is, under what circumstances do we invest in bond funds.
Positioning 1: Medium and short-term fund management
Money funds are suitable for funds that are not used for a few days to weeks, while stock funds are suitable for funds that are not used for more than three years. Bond funds are in the middle. Bond funds are suitable for funds that are not used for months to three years.
Positioning 2: As an investment choice when index funds are overvalued
Generally, the stock market rises sharply in the later period of the bull market, and there is no index fund to invest in. At this time, we can choose bond funds as a transitional product to continue to invest. In fact, stocks and bonds are negatively correlated. Generally, when stocks rise very high, bond funds are in a relatively low position, which is more suitable for investment. Therefore, bond funds can help investors get through the period of overvaluation of stock assets.
Positioning 3: as an asset positioning tool
The bond fund itself has a relatively small volatility and is negatively correlated with the index fund, so it can be used as an asset allocation tool to reduce the overall volatility of the portfolio. However, reducing volatility often means reducing returns. After all, in terms of long-term returns, stock assets are the assets with the highest returns. Therefore, we still need to allocate more equity assets, unless there is no undervalued equity fund, we will consider bond fund later.
Generally speaking, we use bond funds as the first two positions, which are suitable for short-term and medium-term fund management and investment options when index funds are overvalued.
