What does it mean to buy a fund at a premium?
Buying a fund at a premium refers to buying a fund at a price higher than the net value of the fund unit. In on-site fund trading, investors buy and sell funds at the transaction price in the secondary market. If the trading atmosphere is active, the trading price will be quite different from the unit net value, and then there will be a situation of buying funds at a premium or discount.
Buying a foundation at a premium allows investors to take more risks. Then, after buying the fund at a premium, will the price of the fund definitely fall? In fact, not necessarily, it may be that the increase in transaction price has slowed down, but the increase in net value has accelerated, thus narrowing the spread between the transaction price of the fund and the net value of the unit.
In fact, when faced with the situation of premium or discount of funds in the market, we can arbitrage in this way. 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, premium arbitrage can be carried out. The methods are: buy index stocks, buy ETFs, sell ETFs, and take more money to leave;
Discount arbitrage: when the secondary market price is lower than the net value, you can discount arbitrage. The method is: buy ETF in cash, redeem stocks and sell stocks to get more cash.
However, because many constituent stocks are involved, the subscription threshold of many on-site funds is relatively high, and arbitrage by individual investors will be more troublesome.