What is the yield of bond funds in general?
The average annualized rate of return of bond funds is around 5%-7%. Bond funds are divided into pure debt funds and partial debt funds. Pure bond funds are safer than partial debt funds, but the income is lower than partial debt funds.
When the market is good, the yield of bond funds is around 10%, with a maximum of 20%. When the market is bad, the yield of bond funds is generally around 4%, and the yield is between 5% and 7% most of the time.
The annual income of bond funds is generally slightly higher than the annual interest rate of banks in the same period, generally around 5%, and the average annual income of pure bond funds is slightly higher than that of 1 year treasury bonds. But no matter what kind of bond fund, it is also not guaranteed.
What are the risks of bond funds?
1 credit risk: in order to obtain high returns, the debt base usually buys some bonds with high default risk to obtain higher coupon income. However, the benefits and risks brought by this behavior are not equal, because once this low-qualified bond defaults substantially or the default expectation rises sharply, the bond price will drop sharply, even reaching 30% or even higher, thus triggering a cliff-like decline in the net value of the debt base.
2 Interest rate risk: When people expect the future economic warming or under the control of macro policies, bond yields will often rise sharply under the influence of inflation expectations or basic interest rates, which will lead to the overall correction of the bond market.
3 Liquidity risk: As most debt bases are open products, they will face certain subscription and redemption every day. In order to have enough liquidity to deal with redemption flexibly, most debt bases will invest a certain proportion of their positions in government bonds or other interest rate bonds when allocating bonds. Nevertheless, once a large number of bonds are redeemed, it will inevitably have a serious impact on the performance of the debt base.
The security of bond funds is higher than that of stock funds, and the income is usually not as high as that of stock funds, but there have also been cases where bond funds have higher income than stock funds. Bond funds are mainly suitable for stable and conservative investors who pursue relatively safe principal and slightly higher return.