With the continuous development of financial market in recent years, more and more investors began to choose bond funds as investment methods. Bond funds are not without risks. This paper will discuss the risks of bond funds from the following aspects.
I. Credit risk
Credit risk refers to the risk that the bond issuer held by the bond fund cannot pay the principal and interest on time. If the bond issuer defaults, the bond fund will not be able to recover its investment and may even lose its principal. Investors should choose bond funds with higher credit rating to reduce credit risk.
Second, interest rate risk.
Interest rate risk refers to the risk that the bond price held by bond funds fluctuates with the change of market interest rate. When the market interest rate rises, the bond price will fall, which will lead to the decline of the net value of bond funds. Investors should choose their own bond funds, such as short-term bond funds, medium-term bond funds, long-term bond funds, etc., to adapt to the changes in market interest rates.
Three. liquidity risk
Liquidity risk refers to the lack of liquidity of some bonds held by bond funds in the market, which leads to the failure of bond funds to sell bonds in time and the failure of investors to redeem their investments in time. Investors should choose bond funds with good liquidity to ensure that their funds can be recovered in time.
Four. exchange rate risk
If the bonds invested by bond funds are foreign currency bonds, there will be exchange rate risk. When the domestic currency depreciates, it is equivalent to an increase in the price of foreign currency bonds and a decrease in the net value of bond funds. Investors should choose bond funds that invest in local currency bonds to reduce exchange rate risk.
Although bond funds are less risky than stock funds, they also have certain risks. When choosing bond funds, investors should carefully understand all kinds of risks, choose the bond fund type that suits them, diversify their investments and reduce risks.