Basic concepts of funds
Funds
From the perspective of capital relations, funds refer to funds that are exclusively used for a specific purpose and are independently accounted for. These include not only the endowment insurance funds, retirement funds, relief funds, and education incentive funds unique to various countries, but also China's unique financial special funds, employee collective welfare funds, energy and transportation key construction funds, and budget adjustment funds.
In terms of organizational nature, a fund refers to an institution or organization that manages and operates funds that are used exclusively for a specific purpose and are independently accounted for. This kind of fund organization can be an unincorporated institution (such as a special financial fund, an education award fund in colleges and universities, an insurance fund, etc.) or an institutional legal person institution (such as China's Soong Ching Ling Children's Foundation, Sun Yefang Economics Award Foundation, Mao Dun Literary Award Foundation, Ford Foundation, Hobright Foundation in the United States, etc.), or it can also be a corporate legal entity.
Investment Fund
Investment fund refers to the basic principles of mutual investment, profit sharing and risk-taking and certain principles of a joint stock company. , an investment organization system that uses the mechanism of modern trust relationships to pool the dispersed funds of various investors in the form of funds to achieve the expected investment purpose.
Securities Investment Fund
Securities investment fund is a collective securities investment method with maximum benefit sharing and maximum risk sharing, that is, by issuing fund units, the investment of investors is concentrated. Funds are held in trust by the fund custodian, and are managed and used by the fund manager to invest in financial instruments such as stocks, bonds, foreign exchange, and currencies to obtain investment income and capital appreciation. Investment funds have different names in different countries or regions. They are called "mutual funds" in the United States, "unit trust funds" in the United Kingdom and Hong Kong, and "securities investment trust funds" in Japan and Taiwan.
Classification of Funds
Investment funds can be divided into different categories according to different standards.
1. Investment funds can be divided into open-end funds and closed-end funds according to whether fund units can be added or redeemed. An open-end fund refers to an investment fund in which investors can subscribe or redeem fund units at any time after the fund is established, and the fund size is not fixed; a closed-end fund refers to an investment fund whose size is determined before issuance and within the specified period after the issuance is completed. An investment fund with a fixed fund size.
2. According to different organizational forms, investment funds can be divided into corporate investment funds and contract investment funds. Corporate investment funds are investment funds in which investors with different investment goals form a profit-oriented joint-stock investment company and invest assets in specific objects; contract investment funds, also called trust investment funds, refer to funds An investment fund formed by the sponsor issuing fund units based on the fund contract entered into between the sponsor and the fund manager and fund custodian.
3. According to the differences in investment risks and returns, investment funds can be divided into growth investment funds, income investment funds and balanced investment funds. Growth investment funds refer to investment funds that pursue long-term growth of capital as their investment purpose; income funds refer to investment funds that aim to bring a high level of current income to investors; balanced investment funds refer to investment funds that aim to bring a high level of current income to investors; An investment fund that aims to pay current income and pursue long-term capital growth.
4. According to different investment objects, investment funds can be divided into stock funds, bond funds, money market funds, futures funds, option funds, index funds and warrant funds, etc. Stock funds refer to investment funds that invest in stocks; bond funds refer to investment funds that invest in bonds; money market funds refer to short-term money market funds such as treasury bills, large bank negotiable certificates of deposit, commercial papers, corporate bonds, etc. Investment funds that invest in marketable securities: Futures funds refer to investment funds that mainly invest in various futures varieties; option funds refer to investment funds that invest in stock options that can distribute dividends: Index funds refer to investment funds that invest in various futures varieties; An investment fund whose investment object is the price index of a certain securities market; a warrant fund refers to an investment fund whose investment object is warrants.
5. According to the type of investment currency, investment funds can be divided into US dollar funds, Japanese yen funds and Euro funds. USD funds refer to investment funds that invest in the US dollar market; Japanese yen funds refer to investment funds that invest in the Japanese yen market; Euro funds refer to investment funds that invest in the euro market.
In addition. According to the different sources of capital and application areas, investment funds can be divided into international funds, overseas funds, domestic funds, national funds and regional funds, etc. International funds refer to investment funds whose capital comes from domestic sources and invests in foreign markets; overseas funds Also called offshore funds. It refers to investment funds whose capital comes from abroad and invests in foreign markets; domestic funds refer to investment funds whose capital comes from domestic sources and invests in the domestic market; national funds refer to capital which comes from abroad and invests in a specific National investment funds; regional funds refer to investment funds that invest in a specific region.
The role of funds
The role of securities investment funds
1. Funds broaden investment channels for small and medium investors
Investment in small and medium-sized enterprises For investors, depositing money or buying bonds is safer, but the yield is lower; investing in stocks may yield higher returns, but the risk is greater. As a new type of investment tool, securities investment funds pool small amounts of funds from many investors for portfolio investment. They are managed and operated by experts. They have stable operations and considerable returns. They can be said to be specialized Indirect investment tools designed for small and medium-sized investors have greatly broadened the investment channels for small and medium-sized investors. , it can be said that funds have entered the homes of ordinary people and become a popular investment tool.
2. Funds have effectively promoted industrial development and economic growth by converting savings into investment
Funds absorb idle funds from society and create opportunities for companies to raise funds in the securities market. It creates a good financing environment and actually plays the role of converting savings funds into production funds. This mechanism of converting savings into investment provides an important source of funds for industrial development and economic growth. Moreover, as the fund develops and grows, this role will become increasingly important.
3. Conducive to the stability and development of the securities market
First, the development of funds is conducive to the stability of the securities market. The stability of the securities market is closely related to the investor structure of the market. The emergence and development of funds can effectively improve the investor structure of the securities market and become the backbone of stabilizing the market. The fund is operated and managed by professional investors who have rich investment experience, complete information and materials, advanced analysis methods, relatively rational investment behavior, and can objectively stabilize the market. At the same time, funds generally focus on the long-term growth of capital, adopt more long-term investment behaviors, and are less frequently in and out of the securities market, which can reduce the volatility of the securities market. Second, as a financial instrument that mainly invests in securities, the emergence and development of funds have increased the investment varieties of the securities market, expanded the transaction scale of the securities market, and played a role in enriching and activating the securities market. As the fund develops and grows, it has become an important driving force for the development of the securities market.
4. Conducive to the internationalization of the securities market
Many developing countries are cautious about opening up their own securities markets. In this case, cooperation with foreign countries
< p> It is a wise choice to establish funds and gradually and orderly introduce foreign capital to invest in this securities market. Compared with opening the securities market directly to investors, this approach allows regulatory authorities to control the scale of foreign capital utilization and the degree of market openness.The development history of China's fund industry
China's investment funds started in 1991, marked by the promulgation and implementation of the "Interim Measures for the Administration of Securities Investment Funds" in October 1997, and are divided into two a main stage.
1. The development status of investment funds before October 1997. In October 1991, when China’s securities market was just starting out, “Wuhan Securities Investment Fund” and “Shenzhen Nanshan Venture Capital Fund” were established by the Chinese People’s The Wuhan Branch of the bank and the Shenzhen Nanshan Risk Zone Government approved its establishment and became the first batch of investment funds. Since then, in 1992 alone, 37 investment funds have been issued with the approval of the People's Bank of China or other institutions at various levels. Among them, the "Zibo Township Enterprise Fund" was approved by the Head Office of the People's Bank of China and listed on the Shanghai Stock Exchange in August 1993. It is The first publicly traded investment fund. At the beginning of 1993, three education funds, Jianye, Jinlong and Baoding, were approved by the People's Bank of China to be issued in Shanghai. They raised a total of 300 million yuan and were listed on the Shanghai Stock Exchange at the end of that year. As of October 1997, there were 72 investment funds nationwide, raising 6.6 billion yuan. Its characteristics are as follows:
1. Single organizational form. All 72 funds are closed-end, and except for Zibo Township Enterprise Investment Fund, Tianji Fund and Blue Sky Fund, which are corporate funds, the other funds are all contract-type.
2. Small scale. The largest single fund is Tianji Fund, which is 580 million yuan, and the smallest is the first phase of Wuhan Fund, which is only 10 million yuan. The average scale is 80 million yuan, and the total scale is only 6.6 billion yuan.
3. The investment scope is broad and the asset quality is not high. The assets of the vast majority of investment funds are composed of securities, real estate and financing, of which real estate accounts for a large proportion and has low liquidity. Statistical survey results at the end of 1997 showed that its investment scope was roughly as follows: monetary funds 14.2%, stock investment 31%, bond investment 3.5%, real estate and other industrial investments 28.2%, and other investments accounting for 23.1%.
4. Fund sponsors have a wide range of sponsors. The sponsors of investment funds include banks, trust investment companies, securities companies, insurance companies, finance and enterprises, among which trust investment companies account for 51% and securities companies account for 20%.
5. The income levels vary greatly. In 1997, Tianji Fund, which had the highest level of income, had a rate of return of 67%, while Longjiang Fund, which had the lowest rate of return, had a rate of return of only 2.4%.
There are certain problems in the initial stage of China's investment fund industry, including:
First, there is a lack of clear and effective regulatory agencies and supervision in the establishment, management, custody and other aspects of the fund. rule. For example, the establishment of most funds is approved by local branches of the People's Bank of China or local governments. They are based on local regulations such as the "Shenzhen Interim Provisions on the Management of Investment Trust Funds". There is no unified standard, and there are even large differences in names. difference. After the fund was approved for establishment, the approval authority did not implement its regulatory obligations, and there was a lack of corresponding supervision and restriction mechanisms in terms of fund asset operations and investment direction.
The second is that the operation and management of some investment funds are not standardized and the rights and interests of investors lack sufficient protection. For example, some funds have a trinity of managers, custodians, and sponsors. The fund only serves as a source of funds for the fund manager, and the fund assets are mixed with the fund manager's assets, causing confusion in accounting management. For another example, the fund custodian did not play a supervisory role, and the behavior of the fund manager was not effectively monitored.
The third is that asset liquidity is low, and the book asset value is higher than the actual asset value. A large amount of the assets of investment funds are invested in less liquid assets such as real estate, projects, and legal person shares. At the same time, there is the problem of overestimation of asset values. For example, when the real estate bubble gradually dissipated in some areas in the mid-1990s, assets accumulated in real estate were still valued at cost without adjustment according to market price, causing the book value of individual fund assets to be higher than the actual asset value.
2. The development of China’s securities investment funds after October 1997
The promulgation of the “Interim Measures for the Administration of Securities Investment Funds” in October 1997 marked the entry of China’s securities investment funds into the standard development stage. The Interim Measures clearly regulate the establishment, fundraising and trading of securities investment funds, the rights and obligations of fund custodians, fund managers and fund holders, investment operations and management, etc. In March 1998, the establishment of Jintai and Kaiyuan Securities Investment Funds marked the beginning of standardized securities investment funds becoming the leading direction of China's fund industry. In 2001, Huaan Innovation Investment Fund, as the first open-end fund, became another milestone in the development of China's fund industry. At the same time, the work of cleaning up, restructuring and expanding the original investment funds is also in progress, and some of them have met the requirements of standardization and have been relisted as new securities investment funds.
As of the end of November 2002, there were 17 formally established and standardized fund management companies in ***, managing 54 contractual closed-end securities investment funds and 17 open-end funds, of which closed-end The fund issuance scale has reached 81.7 billion yuan, the market value is about 77.3 billion yuan, the total dividends over the years have exceeded 20 billion yuan, the open-end fund management scale has been 56.4 billion yuan, and a variety of investment styles have emerged. At the same time, the continuous improvement of relevant laws and regulations such as the "Interim Measures for the Administration of Securities Investment Funds" and the Implementation Guidelines, the "Securities Investment Fund Listing Rules", the "Pilot Measures for Open-ended Securities Investment Funds" have also laid the foundation for the standardized development of securities investment funds. a solid foundation.
At present, the main characteristics of China’s securities investment funds are reflected in the following aspects:
1. Laws and regulations have been continuously improved, and regulatory forces have been strengthened, creating a good external environment for the operation of the fund industry. , and promote the rapid development of the fund industry. Many fund regulations have been promulgated one after another. The Fund Supervision Department of the China Securities Regulatory Commission, as the main implementation department of fund supervision, implements efficient supervision in the establishment, operation and custody of fund management companies and funds. Once the "Investment Fund Law" under drafting is officially promulgated Its implementation will also become the core legal basis for the development of China's fund industry.
2. The scale of the fund is expanding day by day, and its influence on the market is becoming increasingly important. It has gradually become an important institutional investor that cannot be ignored in the securities market. This includes both newly issued closed-end and open-end funds, as well as standardized operating securities investment funds formed after the liquidation, restructuring and expansion of original investment funds. At present, the total market value of securities investment funds regulated by the China Securities Regulatory Commission is close to 80 billion yuan, equivalent to about 7% of the circulating market value of the Shanghai and Shenzhen stock markets.
3. Fund types are increasingly diversified, and investment styles are gradually emerging. Since the development of the first batch of mainly balanced funds in 1998, there have been funds of different styles such as growth, value, and compound. Especially with the gradual introduction of open-end funds, fund style types have become more distinct. , providing investors with a wide range of investment options.
4. Faced with the competitive landscape after joining the WTO, fund management companies have carried out extensive external cooperation, learned advanced management and technical experience, and promoted innovation in fund products and operations to help China join the international financial market competition. laid the foundation.
History of the Development of Overseas Fund Industry
Investment funds originated in the United Kingdom and gained great development and popularity after being introduced to the United States in the 1920s. Today, the investment fund industry in the United States has the largest asset volume and the most complete management system in the world. The United States is known as the kingdom of funds. After World War II investment funds spread all over the world.
1. Overview of the development of investment funds in the UK
The UK is the birthplace of modern investment funds.
In the mid-19th century, Britain accumulated a large amount of wealth through the development of industry and external expansion. As a result, domestic interest rates continued to decline, and funds sought ways to add value abroad. On the other hand, European and American countries were in urgent need of large amounts of funds as they promoted industrialization, so they came to the UK to issue various securities to raise funds. Investment trusts came into being. In 1868, the world's first investment trust, the "Foreign and Colonial Government Trust", was born in the United Kingdom. The fund raised 1 million pounds when it was established. Its operation method is similar to a modern closed-end contractual fund. It binds the relationship between the parties through a contract, entrusts an agent to use and manage the fund assets, and implements a fixed interest rate system. Subsequently, in 1873, the first organization to professionally manage funds, the "Scottish American Trust", was established. In 1879, the "British Limited Company Act" was promulgated. From then on, investment funds moved from the contractual type to the era of professional management of joint stock companies. The first fund, the prototype of a modern open-end fund, appeared in 1931. In 1943, the United Kingdom established the "Overseas Government Trust Deed" organization. In addition to stipulating that the fund company redeem fund units at the net asset value, the fund also specified a flexible investment portfolio method in the trust deed, marking the modern British securities investment fund. the beginning of.
Closed-end funds in the UK generally raise funds from the public in the form of shares in investment trust companies, while open-end funds generally exist in the form of unit trust funds. Unit trust funds surpass investment trust companies in popularity and total assets under management. As of the end of 1997, there were 154 unit trust fund management companies in the UK, managing nearly 1,600 unit trust funds, with assets under management exceeding 150 billion pounds; and there were more than 570 investment trust companies, with assets under management of 58 billion pounds.
2. Overview of the development of investment funds in the United States
After World War I, the U.S. economy experienced unprecedented prosperity and domestic and foreign investment activities were extremely active. At the same time, economic changes also tend to become more complicated. In this case, the British investment fund system was introduced to the United States. The first fund with the appearance of a modern investment fund, the Massachusetts Investment Trust, was born in Boston in 1924.
After investment funds appeared in the United States, their development was relatively slow due to the Great Depression and World War II in the early 1930s. The United States promulgated the Securities Act in 1933, the Securities Exchange Act the next year, and the Investment Company Act in 1940. These laws, especially the Investment Company Act of 1940, specify the requirements for the composition and management of investment funds in detail, provide investors with complete legal protection, and thus lay the legal foundation for the sound development of investment funds.
After the Second World War, the rapid growth of the U.S. economy in the 1950s and 1960s led to the development of investment funds. In 1970, there were 361 investment funds in the United States, with total assets of nearly US$50 billion and more than 10 million investors. In the 1970s, the U.S. economy experienced stagflation, with high unemployment and high inflation. The development of investment funds also entered a sluggish stage, with both the number of investors and assets under management shrinking. After entering the 1980s, domestic interest rates in the United States gradually decreased and stabilized. Economic growth and the prosperity of the stock market also enabled the rapid development of investment funds. Especially in the mid-to-late 1980s, the advantage of the stock market's long-term average returns being higher than bank deposit and bond interest rates gradually became apparent, and the development of investment funds took a big leap forward. In the 1990s, the rapid development of world economic integration made the concept of investment globalization dominate the development of American investment funds. At the same time, the rapid growth of the domestic economy during the Clinton administration caused the stock market to rise unprecedentedly, and stock funds also expanded rapidly. At present, the total assets of mutual funds in the United States have reached US$7 trillion, with approximately 40 million holders. 50% of households invest in funds, and fund assets account for about 40% of all household assets.
American mutual funds are divided into closed-end and open-end funds. The origins of closed-end funds are earlier than open-end funds, but open-end funds quickly surpassed closed-end funds with their advantages of convenience to investors. At present, there are only about 500 closed-end mutual funds, mostly bond funds and national funds, while the number of open-end funds is as high as more than 5,000, with various types.
3. Overview of the development of investment funds in Hong Kong and Taiwan in my country
The current development status of Hong Kong funds. Investment funds first appeared in Hong Kong in 1960. However, due to limitations in the level of economic development and investors' lack of understanding of funds, the development of the fund market was not ideal before the 1970s. It was not until the 1980s that the development of investment funds showed vitality. The number of funds and total asset value increased rapidly, becoming the largest fund management center in Asia except Japan. In the 1990s, the development of investment funds in Hong Kong inherited the strong momentum of the late 1980s. By the end of 1997, there were 46 fund management companies and 788 investment funds in Hong Kong, with total fund assets of approximately US$63.859 billion. In 1997, the performance of Hong Kong investment funds invested in different regions varied greatly. For example, the return rate of European stock funds was 17.33%, the return rate of U.S. stock funds was 13.57%, the return rate of bond funds was 7.4%, and the return rate of Hong Kong stock funds was 17.33%. The return rate of Japanese stock funds is 19.36%, the return rate of Japanese stock funds is 24.97%, and the return rate of ASEAN funds is 51.37%.
Among them, the stock prices of stocks invested by Hong Kong, Japan and ASEAN funds fell sharply due to the impact of the Southeast Asian financial crisis, which seriously affected the performance of the funds.
The development status of Taiwan funds. Taiwan’s investment funds were born in 1983. Although the time is short, it has developed rapidly. It has gone through the development process of establishing a fund management institution with foreign shares, raising funds outside the island, and investing in international funds in the securities market outside the island. As of the end of 1997, there were 156 investment funds in Taiwan, with a total fund asset value of US$16.381 billion. There are 115 funds whose main object is stock investment, 37 funds whose main object is bond investment, and 4 other funds. Among them, the total asset value of stock funds is US$9.602 billion, accounting for 58% of the total fund asset value. There are currently 21 fund management companies in Taiwan, with average assets under management of US$780 million. In 1997, the average return rate of Taiwanese funds was 26.26%.
Comparison of funds and other financial products
Comparison of funds and other financial products
1. Comparison of funds and stocks and bonds
Securities investment funds are a collective securities investment method with maximum benefits and maximum risks. That is, through the issuance of fund units, investors' funds are pooled, held in custody by the fund custodian, and managed and used by the fund manager. Engage in investing in stocks, bonds and other financial instruments
. Stock certificates are certificates issued by a joint-stock company to certify the shares held by shareholders, and are in the form of company shares. Investors become owners of the issuing company by purchasing stocks, receive operating income based on the amount of shares they hold, and participate in voting on major decisions. Bonds refer to securities issued in accordance with legal procedures and with an agreement to repay principal and interest within a certain period of time. It is characterized by fixed returns and low risks.
Compared with stocks and bonds, securities investment funds have the following differences:
(1) The status of investors is different. Stock holders are shareholders of the company and have the right to express their opinions on the company's major decisions; bond holders are creditors of the bond issuer and have the right to recover principal and interest when due; fund unit holders are the fund's The beneficiary reflects the trust relationship.
(2) The degree of risk is different. Generally speaking, stocks are riskier than funds. For small and medium-sized investors, due to the limitation of the total amount of disposable assets, they can only directly invest in a few stocks. This violates the investment taboo of "putting all eggs in one basket". When stocks fall due to stock market declines or corporate financial conditions deteriorate, capital may disappear; the basic principle of funds is portfolio investment, diversification of risks, and investment of funds in different proportions in different maturities and different types of securities. Minimize risk. Under normal circumstances, the principal of bonds is guaranteed, the income is relatively fixed, and the risk is smaller than that of funds.
(3) The income situation is different. The returns on funds and stocks are uncertain, while the returns on bonds are certain. Generally speaking, fund returns are higher than bonds. Taking U.S. investment funds as an example, the average income growth rate of 25 types of funds in the five years from 1976 to 1981 was 301.6%. Among them, the highest was 465% for the 20th Century Growth Investor Fund, and the lowest was Plytren. The German fund was 243%; while the interest rates of two 5-year government bonds issued domestically in 1996 were only 13.06% and 8.8% respectively.
(4) Different investment methods. Different from investors in stocks and bonds, securities investment funds are an indirect form of securities investment. Fund investors no longer directly participate in the buying and selling activities of securities, and no longer directly bear investment risks. Instead, experts are responsible for the specific investment. Determination of direction and selection of investment objects.
(5) The price orientation is different. When the macro-political and economic environment is consistent, the price of a fund is mainly determined by the net asset value; the main factor affecting bond prices is interest rates; and the price of stocks is greatly affected by the relationship between supply and demand.
(6) Investment recovery methods are different. Bond investment has a certain period, and the principal will be recovered after the expiration; stock investment has an unlimited period. Unless the company goes bankrupt or enters liquidation, investors are not allowed to withdraw their investment from the company. If they want to withdraw it, they can only withdraw it according to the market price on the securities exchange market. Price realization; investment funds vary depending on the form of the fund they hold: closed-end funds have a certain period, and after the expiration, investors can get the corresponding remaining assets according to the shares they hold. During the closed period, they can also be liquidated on the trading market; open-end funds generally have no time limit, but investors can request redemption from the fund manager at any time.
Although several investment tools have the above differences. But there are also many connections between them:
Funds, stocks, and bonds are all securities, and investments in them are securities investments. The division of fund shares is similar to stocks: stocks are divided by "shares" and their total assets are calculated; fund assets are divided into several "fund units", and investors share the value-added income of the fund according to the shares of fund units they hold. Contractual closed-end funds are similar to bonds and receive a lump sum of investment upon expiration of the contract. In addition, stocks and bonds are the investment objects of securities investment funds. There are stock funds and bond funds abroad that specifically invest in stocks and bonds.
2. Comparison of open-end funds and bank savings
Open-end funds and bank savings have many similarities: First, the deposits and withdrawals or subscriptions and redemptions of both can be done in the same place. It is carried out by branches of commercial banks and does not involve other institutions and departments. Depositors or investors only need to go through the relevant procedures in front of the bank; secondly, they can exchange cash at any time at a very small cost; finally, the benefits of both are relatively small. Stablize. The income from deposits is deposit interest, and the amount is generally fixed. Under normal circumstances, interest income is completely guaranteed. The return of investing in open-end funds is the growth of the fund's net value. During the operation process, fund managers use investment portfolios to avoid non-systemic risks to the greatest extent. In mature markets, fund managers can also use risk management to avoid non-systemic risks. The hedging mechanism is used to avoid systemic risks, so the income from investing in open-end funds is relatively guaranteed and relatively stable under normal circumstances.
Although the two have many similarities as mentioned above, there are still essential differences, mainly as follows:
First, the two have different fund investment directions. Banks invest funds from savings deposits into production or consumption through corporate loans or personal credit channels to obtain interest margin income; open-end funds invest investors' funds in the securities market, including stocks, bonds, etc., through stock dividends or To obtain stable income through bond interest, and at the same time obtain capital gains through the price difference of securities market.
Second, there are essential differences between deposit contracts and fund contracts, and their risks are different. Bank savings deposits carry much less risk than open-end funds. The deposit contract is a creditor's rights contract, and the bank has full legal liability to the depositor; the open-end fund puts the raised funds into the securities market, and the fund manager only manages the funds on behalf of the investors. The fund contract is an equity contract, and the fund The manager does not guarantee the rate of return on the funds. When investors redeem the fund, they receive funds based on the net value of each share of the fund. If the fund is managed well, the net value of the fund will increase and investors will receive higher returns; if the securities market conditions are poor or the fund manager does not manage it well, the net value of the fund will fall and investors will suffer losses. The risk is directly related to the securities market conditions and the management level of the manager.
Third, the income between the two is different. The income from bank savings deposits is interest. Under normal circumstances, regardless of the bank's performance, the interest rate is relatively fixed. The rate of return of open-end funds is higher than the interest rate of deposits under normal circumstances, but the income of the fund is not fixed. When When the market conditions are good and the manager manages it well, the fund's income will be higher than the deposit interest rate, and vice versa. In addition, the returns of different funds also vary, while the deposit interest rates of different banks are basically the same.
Fourth, the information transparency managed by the two is different. After banks accept deposits, they have no obligation to disclose the operation of funds to depositors, and generally depositors do not care about this; open-end fund managers must regularly announce the fund investment status and fund net value to investors, and investors can inform investors at any time. You can know how much cash you can get from your investment.
Fifth, the cost of converting the two into cash is different. The deposit and withdrawal of bank deposits do not require any fees; the redemption and subscription of open-end funds require certain fees, so there is a certain cost for investors to convert funds.
Whether to invest in open-end funds or deposit in banks in the form of savings, investors may wish to fully compare the similarities, differences, advantages and disadvantages of the two, and decide based on the amount of personal funds and risk tolerance. Arrange the investment of funds based on the size and future demand for funds.
What is an index fund?
Index funds are a type of fund that are based on the principle of fitting the target index and tracking changes in the target index to achieve synchronized growth with the market. The investment of index funds adopts an investment strategy that fits the return rate of the target index, diversifying the investment in the component stocks of the target index, and strives to make the return rate of the stock portfolio fit the average return rate of the capital market represented by the target index.
What is an umbrella fund?
Umbrella funds are actually an organizational structure of open-end funds; under this organizational structure, the fund sponsor initiates and establishes multiple mutual funds based on a general fund prospectus. Funds that undergo conversion procedures are called sub-funds or component funds. The fund system composed of these sub-funds is collectively called an umbrella fund. Furthermore, an umbrella fund is not a specific fund, but a way of operating and managing multiple funds initiated and managed by the same fund sponsor. Therefore,
it is usually considered an "umbrella structure" " may be more appropriate.
What is a LOF fund?
LOF fund, the full name in English is "ListedOpen-EndedFund", and in Chinese it is called "listed open-end fund". That is to say, after the issuance of a listed open-end fund, investors can either subscribe and redeem fund shares at designated outlets, or buy and sell the fund on the exchange.
However, if investors subscribe for fund shares at a designated outlet and want to sell them online, they must go through certain transfer custody procedures; similarly, if they purchase fund shares online at an exchange and want to redeem them at a designated outlet, they must also Certain transfer procedures must be completed.
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