When a fund suffers a loss, covering up a position is a good way to save it. Covering up a position is also a common self-rescue method in fund trading. So under what circumstances does the fund need to cover its position? What is the difference between adding a fund position and covering a position? Let us analyze it for you below:

Under what circumstances does a fund need to cover its position?

It is usually better for funds to cover positions when the fund falls or the market crashes. That is, when the net value of the fund falls below the purchase date, it can be covered. Covering positions when the fund is falling can evenly share fund transaction costs. Lower transaction costs make it easier to obtain benefits, lower the fund's profit point, and reduce the risks of fund transactions.

However, investors need to pay attention to the fact that there are operational timings for fund cover-ups. It is best to cover up positions before three o'clock on the day when the fund falls, because if the cover-up is after three o'clock, the fund's net value will be based on The calculation of the next trading day is equivalent to buying on the next trading day, and there will be a certain error from the previous data.

Investors can consider the timing of operations based on the overall environment of the fund market and analyzing the subsequent development status of the fund. When the fund has a support level, it will cover its position. OTC funds can look at the trend of the underlying stock; on-site funds can look at the support and pressure levels. When adding a fund, you can look at the rise and fall of the fund's valuation, the amount of profit and loss, and the price-to-earnings ratio.

What is the difference between adding a fund position and covering a position?

1. Meaning

Fund position increase means that on the basis of holding the original fund and the fund has started to make profits when the fund rises, investors believe that the fund may continue to rise in the future, so they continue to The act of buying.

Fund cover-up refers to the act of continuing to buy the fund and share the transaction costs equally on the basis of holding the original fund and causing losses due to the decline of the fund. It is also called increasing holdings and increasing the holding share. .

2. Shares

When the fund increases its position, the fund’s net value has already risen, so fewer shares are purchased; when the fund replenishes its position, the fund’s net value is lower than when it was purchased. is lower, so there are more shares to cover the position.

3. Changes in net value

The net value of a fund that adds a position is generally rising; the net value of a fund that adds a position is falling.

4. Purpose

The purpose of fund replenishment is to continue to buy funds on the basis of the original profits to obtain an increase in income; while fund replenishment is to reduce losses and share them equally. transaction costs and continue to buy.