What is Securities Investment Fund?
Securities investment funds (referred to as a “fund”) is a kind of securities investment in the form of portfolio by issuing fund shares and pooling the funds of many investors to form an independent asset, which is entrusted to the fund custodian and managed by the fund manager. It is a collective investment approach of benefits sharing and risk sharing.
What are the characteristics of securities investment funds?
Collective Financing and Professional Management
Pool the funds of many investors, give full play to the scale advantage of funds and reduce investment costs. Professional investment researchers of funds and strong information network can better track and analyze the securities market in all aspects.
Portfolio Investment and Risk Diversification
Funds usually buy dozens or even hundreds of securities. Buying funds is equivalent to buying a basket of securities with very little money for investors. The losses caused by the decline of certain securities can be made up with the profits of other securities. Investors can fully enjoy the benefits of portfolio investment and risk diversification.
Benefit Sharing and Risk Sharing
The fund's investment income after deducting the expenses borne by the fund are all owned by the fund investors, and are allocated according to the proportion of the fund shares held by each investor.
Strict Supervision and Transparent Information
The regulatory authorities impose strict supervision on the fund industry, severely crack down on various behaviors that harm the interests of investors, and force the fund to conduct more adequate information disclosure.
Independent Custody and Guaranteed Safety
The fund manager is responsible for the fund investment operation, and does not handle the custody of the fund property. The custody of the fund property is handled by the fund custodian who is independent of the fund manager. This check-and-balance mechanism of mutual restraint and mutual supervision provides important protection for the interests of investors.
Step 1 : Measure Your Risk Tolerance
If you are unwilling to bear any losses, but you buy a fund with large fluctuation in net value, it will be more likely to cause mental stress. Therefore, before investing, you need to understand your ability to withstand risks. Usually people with less financial burden or more positive personality have higher risk tolerance.
Step 2 : Know Your Financial Resources
Investment behaviors such as “anticipate one's income” should be avoided, otherwise it will have a negative impact on daily life. For example, those who can only save thousands of Yuan of free money each month should avoid all investment in the stock market. It is best to use a regular quota to plan your investment.
Step 3 : Formulate Investment Objectives
If you have goals and directions, you will try to motivate yourself. If it is a long-term goal, the risk tolerance of the investment target can be higher through time and economic cycle factors. But if it is the funds that will be used within three years, it must control and reduce the risk of investment moderately.
Step 4 : Disperse Risk
Don't put all the eggs in the same basket, it is a famous saying of investment. Because of the cyclical cycle of the economy, financial markets are no different. For example, from 2000 to 2002, global stock markets were short, but the bond market showed quite a bright bullish trend. Therefore, “asset allocation” is a very important concept and the highest guiding principle of investment. The simplest principle is that in the portfolio, it should include equity funds and bond funds. In terms of proportion, it must be based on individual risk tolerance, economic cycle and investment objectives; thus, you can truly spread the risk and pursue asset appreciation opportunities.
Step 5 : Choose The Right Fund
In general, global funds are relatively low risk because there are more alternative investment targets, followed by regional funds, while single country funds have higher risks. Lower risk also means that the reward may be lower, so the collocation approach is a more robust strategy.
Choose Securities Investment Funds Correctly
Fund investment focuses on long-term benefits. How should investment funds be selected?
Here are three steps to teach you how to choose the correct securities investment funds.
Step 1 : Choose a Trustworthy Fund Company
The industry status of the fund company:
First understanding whether the fund company has a comparative advantage in the industry, which helps to identify the overall capabilities of the fund company. After confirming that this is a company worthy of entrustment, and then screening individual funds, which can protect your assets more securely.
Total size of assets under management:
The fund is a collection of people's funds for investment. The larger the asset size and number of customers of a fund company, the higher its trust in the minds of investors, and these are all worthy of reference.
The overall performance of its funds:
How to evaluate the research capabilities and overall performance of fund companies? One of the most important indicators is the long-term performance of all of its funds. In addition, the company's award-winning records around the world can also make the assessment more objective.
Step 2 : Choose a Good Fund For You
Understand your personality and analyze investment attributes (risk tolerance)
Instead of talking about the fund, it is more important to be suitable for yourself. If you are willing to take on the risk of large short-term fluctuations, you can consider investing in emerging markets or stock-type equity funds. If you feel that the risk tolerance is medium, regional equity funds, high-yield bond funds, and portfolio funds are good choices. If you can only tolerate very small losses, bond funds and target date funds are worthy of your reference.
Whether the fund's short, medium and long-term performance is stable is an important comprehensive reference factor.
Although the past performance does not represent future performance, it still has some reference value. However, it is recommended that you do not blindly choose the fund with the first performance in a single month. You should comprehensively observe the short, medium, and long-term performances, and compare them with the same type of funds before making a choice. Taking the well-known fund rating agency Micropal as an example, the fund must be established for three years before being rated and being included in the fund award list. The reason is that a fund must go through a certain market cycle to have more objective data to be evaluated.
Step 3 : Develop An Investment Strategy That Suits You
If you are sensitive to the economic cycle, we recommend that you make a single investment.
Only by understanding the economic cycle can you choose the right asset. When the economy improves and the stock market rises, the proportion of positive returns on equity funds investment may be higher. If interest rates go down and the economy declines, the profit of fixed-income bond assets may be better.
If you are not sensitive to the economic cycle, we recommend that you build a portfolio or make regular fixed investments.
In response to the rise and fall of the economy, you can also adopt a way of establishing a portfolio by including equity funds and bond funds at the same time, then you don't have to worry about the risk being too concentrated or missing any value-added opportunity for assets. Or you can use a regular quota to make long-term investments and reduce the risk of market volatility through average costs. However, the overall profit margin may be slightly compressed.