The parent fund of a graded fund can be divided into two shares, A and B. It is said that there will be discounts with these two shares, but generally speaking, the discount in a bear market will lead to heavy losses for investors, while the discount in a bull market is a symbol of profit. What is the discount principle of graded funds? Explain in detail below.

For stock-based graded funds, AB share is 1: 1, so their initial leverage is twice that of 2: 1. This initial leverage is also the leverage when the net value of graded funds is 1 after discount and after discount. When the net value of B continues to rise, the leverage ratio gradually decreases. In order to keep the leverage ratio of B at a certain level, it is stipulated that when it rises to a certain level, the graded fund will be put away.

Folding is calculated based on the master library. For example, if the net value of the parent fund rises to 2 yuan, or 1.5 yuan (depending on the provisions of the fund), there will be a discount. The general conversion method is that the total net value of parent, class A and class B belongs to 1. There are also some A-levels that do not participate in folding, but this has little effect on folding. Grading B is to convert the part with more B than A into a new parent fund. Therefore, these original B shares will involve the disappearance of the conversion premium.

Grade B discount, profit and loss depends on the premium rate level before and after grade B discount. Generally, the higher the net value of Class B, the lower the premium level and the lower the leverage. The lower the net value of Class B, the higher the premium level and the higher the leverage.