The basic concept of bond fund is an investment tool, which gains income by investing in various bonds. Bond funds usually invest in various types of bonds, including government bonds, corporate bonds and mortgage-backed securities. The investment income of bond funds mainly comes from the interest income of bonds and the income brought by price changes.
Reasons for the decline of bond funds Bond funds sometimes fall due to the following reasons:
1. Interest rate rises. The price of bond fund is negatively correlated with interest rate. When interest rates rise, bond prices fall, so the price of bond funds will also fall.
2. Credit risk increases. If the credit rating of the bond issuer declines, the bond price will fall and the price of the bond fund will also be affected.
3. Liquidity risk. The liquidity of the bond market may be affected. If there is a liquidity crisis in the market, the price of bond funds will also fall.
4. Market risk. The price of bond funds may be affected by the overall risks of the market, such as the stock market decline and economic recession.
How to Avoid the Risks of Bond Funds In order to avoid the risks of bond funds, investors can take the following measures:
1. Diversified investment. Investors can choose to invest in various bond funds to spread risks.
2. Pay attention to the credit rating. Investors can pay attention to the credit rating of bond issuers and choose bond funds with higher credit rating.
3. Pay attention to interest rate changes. Investors can pay attention to the change of interest rate and choose the bond fund that suits them.
4. Pay attention to the operation of fund managers. Investors can pay attention to the operation strategy and portfolio of fund managers and choose bond funds managed by experienced fund managers.
Bond funds are also high-risk investment tools. Investors need to choose appropriate bond funds according to their risk tolerance and investment objectives, and take corresponding risk control measures to avoid risks to the greatest extent.