Is the long-term bond holding foundation losing money?
Under normal circumstances, the risk of bond funds is relatively low, and the probability of losing money by holding bond funds for a long time is also relatively low, but it does not mean that there is no risk at all. Bond funds are not guaranteed financial products, so there is still the possibility of losses. There are three main risks in holding bond funds for a long time, namely default risk, interest rate risk and inflation risk.
1 default risk: bonds have default risk. If the bonds invested cannot be cashed, then this part of the investment is equivalent to a total loss, and the loss will naturally be borne by the investors. Moreover, the bond fund's own income is not high, and the possibility of relying on other bond investments to earn back the loss of default bonds is also very low.
2 Interest rate risk: Interest rates also have an impact on bond funds, but the impact of interest rates is relatively short-term, and the impact on long-term bond funds is not great. The market interest rate is inversely proportional to the bond price. When interest rates rise, it will bring downward pressure on bond prices.
3 Inflation risk: Excessive inflation will lead to rising prices, currency depreciation, and bond funds' own income is not high. In the event of inflation, the actual income of investors will be lower than the nominal income, resulting in losses.
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In short, holding bond funds for a long time may also lose money, so we should treat bond fund investment rationally. If you can't bear the risk of loss, you can choose to invest in some wealth management products with fixed income and capital preservation, which can bring fixed income to investors.