Investing in bond funds is also tricky. We need to understand the factors that affect bond funds and the investment skills of bond funds, but what are the factors that affect bond fund returns? How to invest bond funds? Here is a brief explanation for you.
Three Factors Influencing Bond Fund Returns
1. Term: Generally, the yield of medium and long term bond funds is higher than that of short term bond funds. This is because the longer the term, the higher the uncertainty, and the higher the expected yield of investors. Of course, the risk of medium - and long-term debt funds is also higher than that of short-term debt funds.
2. Credit: Generally speaking, the higher the credit risk, the higher the default risk, and the higher the return required by investors. Different bonds have different bond credit risks, so bond funds hold many different bonds to share the credit risks of a single bond.
3. Interest rate: the change of interest rate will affect the price of bonds, and the two are inversely related. So when the market interest rate rises, the bond price will fall, and when the market interest rate falls, the bond price will rise.
Although the interest rate has a greater impact on bond funds, the impact of interest rates on different types of bond funds is different. Medium and long-term bond funds are more sensitive to changes in interest rates and respond more strongly. For example, when interest rates rise, medium and long-term bond funds fall more than short-term bond funds. When interest rates fall, medium and long-term bond funds rise more than short-term bond funds. Therefore, when we invest in medium - and long-term debt funds, we also need to invest at an undervalued time.
Investment skills of bond funds
But how to judge the valuation of medium - and long-term bond funds? We know that when the interest rate rises, the bond fund rate will probably fall, and when the interest rate falls, the bond fund rate will probably rise. Of course, we hope that when we hold bond funds, they will rise, so when the interest rate drops, we are more suitable for investment. But because the interest rate will not rise or fall without limit, the probability of interest rate decline will be greater when it is at a higher position. Then we can vote
