Financial management and bond funds are two important investment methods in the investment field, both of which can help investors realize asset appreciation. There is a difference between the two risks. This paper will discuss which risk is greater, financial management or bond fund, and analyze it from four aspects: market risk, credit risk, liquidity risk and yield risk.
# # Market risk
Market risk refers to the risk that investors may face due to market changes. In financial management, market risk is largely related to the performance of risky assets such as the stock market. If the market does not perform well, the value of investors' assets will also decline. Bond funds invest in the bond market, which is usually more stable than the stock market. The market risk of bond funds is relatively small.
# # Credit risk
Credit risk refers to the possibility that the bond issuer cannot repay the principal and interest of the bond on time. Bond funds invest in the bond market, so they will also face credit risk. If the bond issuer fails to repay the principal and interest of the bond on time, the value of the bond fund will also decline. Bond funds usually diversify risks, that is, invest in a variety of bonds, thus reducing credit risk.
Relatively speaking, the credit risk of wealth management products is smaller. Wealth management products are usually issued by banks and other financial institutions, and the country implements a deposit insurance system, so the credit risk of wealth management products is relatively small.
# # Liquidity risk
Liquidity risk refers to the risk that the assets held by investors cannot be quickly realized in the market. Bond funds usually invest in long-term bonds, so they also face liquidity risks. If investors need to redeem bond funds in advance, they may have to bear higher transaction costs.
In contrast, the liquidity risk of wealth management products is small. Wealth management products usually have a short investment period, and investors can easily withdraw funds when they are due.
# # Revenue risk
Yield risk means that investors may not get the expected rate of return. The yield of bond funds is usually stable, because the yield of bonds is usually determined by the changes in bond interest rates and bond prices. Bond funds cannot guarantee investors a fixed rate of return. If the market interest rate rises, the yield of bond funds will also fall.
In contrast, the yield risk of wealth management products is greater. Wealth management products usually have no fixed rate of return, but fluctuate according to market interest rates. If the market interest rate drops, the yield of wealth management products will also drop.
The risk of bond funds is relatively small, while the risk of wealth management products is relatively large. When investors choose investment methods, they need to choose according to their own risk tolerance and investment purpose.