Bond funds, also known as bond funds, refer to funds that specialize in investing in bonds. By concentrating the funds of many investors, we can make portfolio investment in bonds and seek relatively stable returns. In China, bond funds mainly invest in government bonds, financial bonds and corporate bonds. Here, I would like to share some information about the types of bond funds, hoping to help you!
Overview of bond funds
Bond funds: More than 80% of the fund assets of bond funds are invested in bonds.
Bond fund is a kind of securities investment fund with bonds as its investment object. By pooling the funds of many investors, it implements portfolio investment in bonds and seeks relatively stable returns.
With the development of the bond market, bond funds have become an important type of securities investment funds, and their scale is second only to that of stock funds. Take the United States as an example. At the beginning of 1997, the total assets of bond funds were $88.6 billion, accounting for 25% of the total assets of American funds, while the proportion of equity funds in the same period was 49%. In Hong Kong, the total assets of bond funds at the beginning of 1997 were US$ 7.05 billion, accounting for 17% of the total assets of Hong Kong funds, while the proportion of equity funds in the same period was 60%.
Bond funds are closely related to the trend of interest rates. The fluctuation of market interest rate will lead to the change of bond price and yield, and the income level of bond funds will of course be affected by the change of interest rate. This is particularly evident in the United States, where interest rates are highly market-oriented. 1985 due to the interest rate cut in the United States that year, the attractiveness of bond investment increased, and the new capital flowing into the US Treasury bond fund surged from $7.4 billion to $42.8 billion that year, a six-fold increase over the previous year. 196 Due to the interest rate increase, the attractiveness of bond investment declined, and the capital flowing into the national debt fund in that year decreased by13 billion US dollars compared with the previous year. The income of bond funds is also closely related to the credit rating of the bonds invested. Some bond funds invest heavily in bonds with higher credit ratings, with lower risks but lower returns. Some bond funds invest in junk bonds (such as bonds below Standard & Poor's 3B and Moody's Baa) urgently, which is risky but has relatively high returns.
Types of bond funds
According to the types of bonds invested, bond funds are divided into the following four types:
(a) government bond funds, emergency investment in government bonds (bonds) and other bonds;
(2) the municipal bond fund, which makes emergency investment in government bonds (municipal bonds) issued by local governments;
(3) Corporate bond funds, which are urgently invested in bonds (corporate bonds) issued by various enterprises;
④ International bond funds. There is an urgent need to invest in various bonds (international bonds) in the international market.
Bond funds have the following characteristics:
(1) Low crisis and low income. Due to the stability of bond income and less crisis, compared with stock funds, bond funds have less crisis but lower income.
② Low cost. Because the management of bond investment is not as complicated as that of stock investment, the management fee of bond fund is relatively low.
(3) The income is stable, the investment bonds have regular interest returns, and the bond fund promises to repay the principal and interest when due, so the income of the bond fund is relatively stable.
④ Pay attention to current income. Bond funds are eager to pursue relatively fixed returns in the current period. Compared with equity funds, they lack appreciation potential and are more suitable for investors who are unwilling to take too many risks and seek stable returns in the current period.
Advantages of investing in bond funds
Compared with direct investment bonds, investors investing in bond funds have the following advantages:
(1) The crisis is low. By concentrating investors' funds to invest in different bonds, bond funds can effectively reduce the crisis that a single investor may face when directly investing in a bond.
② Expert management. With the increasing diversification of bond types, ordinary investors should not only carefully study bond issuance, but also judge macroeconomic indicators such as interest rate trend, which is often beyond their ability, while investing in bond funds can share the results of expert management.
③ Strong liquidity. If investors invest in illiquid bonds. Only when it is due can it be cashed. Indirect investment in bonds through bond funds can obtain high liquidity, and the held bond funds can be transferred or redeemed at any time.
The difference between bond funds and bonds
As a portfolio investment tool for investing in a package of bonds, bond funds have important differences from single bonds.
(1) The income of bond funds is not as fixed as the interest of bonds.
Investors who buy fixed-rate bonds will receive fixed interest income on a regular basis after purchase, and the principal can be recovered when the bonds expire. As a combination of different bonds, bond funds will distribute income to investors regularly, but the income distributed by bond funds has risen and fallen, which is not as good as the fixed interest of bonds.
(2) Bond funds have no definite maturity date.
There will be a certain maturity difference with ordinary bonds. Bond funds consist of a group of bonds with different maturities, so there is no definite maturity. However, in order to analyze the characteristics of bond funds, we can still calculate the average maturity of all bonds held by bond funds.
(3) The yield of bond funds is more difficult to predict than that of buying and holding a single maturity bond.
The yield of a single bond can be calculated according to the purchase price, cash flow and the principal recovered at maturity, but the bond fund is composed of a group of different bonds, so the yield is difficult to calculate and predict.
(D) Investment crisis differences
As the maturity of a single bond approaches, the interest rate crisis will be reduced. Bond funds have no fixed maturity date, and the interest rate crisis they bear will depend on the average maturity date of the bonds they hold. The average term of bond funds is relatively constant, and the interest rate crisis suffered by bond funds usually remains at a certain level. The credit crisis of a single bond is relatively concentrated, and the bond fund can effectively avoid the higher credit crisis that a single bond may face by diversifying its investment.