When investing in on-market funds, sometimes you will see fund companies issuing fund premium risk tips. Many investors who just started investing in funds, unknown so. So what are some tips about the premium risk of funds?

What is the risk warning of fund premium?

The risk of fund premium shows that the transaction price of the fund in the secondary market is much higher than its unit net value. In this case, the price in the secondary market is likely to fall back. The risk of fund premium mainly exists in the trading of on-site funds. On-site funds have two prices, one is the unit net value of the fund, which is the real price of the fund; Second, the transaction price of the fund is influenced by market sentiment and trading behavior.

In fact, when the net value of the fund unit deviates too much from the transaction price, we can arbitrage the fund. The arbitrage of on-site funds can be divided into premium arbitrage and discount arbitrage. Take ETF as an example, the arbitrage method is as follows:

1 premium arbitrage: when the secondary market price is greater than the net value, it can be arbitrage at a premium. The method is: buy index stocks-buy ETFs-sell ETFs-take more money and leave;

Discount arbitrage: when the secondary market price is lower than the net value, you can discount arbitrage. The method is: buy ETF-cash-redeem stocks-sell stocks-get more cash.