If you want to say how much you can lose at most, you can lose all the principal in theory, but in practice, the loss and loss range of the fund are probabilistic. Different types of funds have different risk coefficients and different loss probabilities. In order to be more specific, we can use the maximum exit index to represent the historical maximum loss of the fund.
The importance of maximum retreat
The biggest retreat of the fund is that the net value of the fund falls from the highest point to the lowest point in a certain period of time. The magnitude of this range, that is, the largest decline, represents the biggest loss that may occur after a fund is bought.
Money funds are basically positive returns, the maximum withdrawal of bond funds is generally within 5%, and the maximum withdrawal of stock funds is generally above 20%.
Studying the maximum retracement data can effectively help investors control the risks in fund investment.
Everyone has different risk tolerance. You can choose the fund within your risk tolerance range according to the maximum retracement data, instead of blindly paying attention to the fund's income. The fund that is most suitable for your risk preference is the most suitable, so that you can rationally face the possible losses in the investment process.
The more the fund falls, the harder it is to recover its capital. The decline of the fund has a great test for investors' mentality. Whether you can endure losses for a long time or endure high losses determines whether the investment can continue. Time cost and investment confidence need to be considered. In the case of a sharp drop in the fund, it is also possible to measure whether it is necessary to lighten or cover the position according to the maximum retracement index.
How to analyze the maximum retracement data
There is no absolute standard to judge the maximum withdrawal data of a fund, but it is compared with others, such as the market at the same time. If the maximum withdrawal data of a fund is higher than that of the fund, the risk is greater than the market. If the maximum retracement data is less than the market, it is more stable than the market.
In addition to comparing with the broader market, we should also compare with similar funds, because we should choose the best.
It should be noted that the maximum withdrawal amount of the fund is not equal to the loss of the fund. If we hold a fund for a long time, and this fund has a big retreat in a short time, but it is repaired and returned to the normal rising level in a short time, our fund is profitable in the case of holding one, which also shows that the fund manager of this fund has strong management ability.
Risks and benefits cannot be considered separately, they are interdependent. We can't just look at the maximum retracement without considering the benefits, nor can we just look at the maximum retracement without considering the benefits. It is the best choice to choose a fund with higher returns within the maximum retracement range that you can bear.