The popular explanation of graded funds is to invest the assets of A share and B share as a whole, in which the holder of B share pays the agreed interest to the holder of A share every year, and the overall investment profit and loss after paying the interest is borne by B share. Take a graded fund product X(X is called parent fund) as an example, which is divided into A share (agreed income share) and B share (leveraged share). Share A agrees on a certain rate of return, and the remaining assets of fund X after deducting the principal and accrued income of share A are all classified as share B, and the losses are borne by the holders of share B within the limit of the net asset value of share B. When the overall net asset value of the parent fund falls, the net asset value of share B falls first; Accordingly, when the overall net value of the parent fund rises, the net value of the B share will appreciate faster after providing the A share income. Share B usually gains certain leverage by participating in the distribution of residual income or taking losses to a greater extent, which has a more complicated internal capital structure and its nonlinear income characteristics make it imply options.

Are you dizzy? Then let's use the story version of Mr. Handsome Niu. A has 1 yuan, and B has 1 yuan. A lends his 1 yuan to B, so B has 2 yuan money to invest in stocks. B pays interest to A every year according to the agreement (at present, it is generally 6%-7% annualized), and the profit and loss of B's stock trading has nothing to do with A, but if B's stock trading loses these two dollars to the red line of (1.25 yuan +A's accrued interest in the current year), it will trigger a low discount to protect A's principal 1 yuan and corresponding interest from loss.

In other words, Class A shares have the characteristics of guaranteed capital and guaranteed income; Class B stocks have the characteristics of leverage to amplify risks and returns.