bond funds refer to funds that invest in bonds. Generally speaking, bonds provide investors with fixed returns and repayment of principal at maturity, and the risk is lower than that of stocks, so compared with stock funds, bond funds have the characteristics of stable income and low risk. Compared with the prosperity of equity funds this year, bond funds seem to be somewhat lonely, but loneliness is not necessarily a derogatory term for people who like peace.

if you don't want to put all your investments in the stock market, you can consider including cash or bonds in your portfolio. For fund investors, you can buy some bond funds. But at least pay attention to the following points before investing.

Know the positions of bond funds

In order to avoid investment mistakes, you need to know what your bond funds hold before buying. In China, bond funds mainly invest in fixed-income varieties such as government bonds, financial bonds and corporate bonds, and can also invest in convertible bonds or even a small number of stocks.

for ordinary bonds, the two basic elements are interest rate sensitivity and credit quality. The rise and fall of bond prices is inversely related to the rise and fall of interest rates. When interest rates rise, bond prices fall. To know how sensitive the bond price changes and thus the net asset value of bond funds are to interest rate changes, duration can be used as an indicator to measure. The longer the duration, the more sensitive the net asset value of bond funds is to the change of interest. If the duration of a bond fund is 5 years, then if the interest rate drops by 1 percentage point, the net asset value of the fund will increase by about 5 percentage points; Conversely, if the interest rate rises by 1 percentage point, the fund's net asset value will suffer a loss of 5 percentage points. However, domestic bond funds generally only publish the average remaining period of the portfolio, which is highly correlated with the duration, and the duration can also be understood through the length of the average remaining period.

determine your correct investment reasons

if you buy a bond fund for the purpose of increasing the stability of your portfolio or obtaining a higher return than cash, this strategy is feasible. If you think that buying a bond fund will not lose money, you need to think again.

Bond funds also have risks, especially in the environment of raising interest rates. When the interest rate goes up, the price of bonds will fall, so your bond fund may have a negative return. Especially in China, most bond funds hold a lot of convertible bonds, and some also invest a small amount of stocks. The fluctuation of stock price and convertible bond price will increase the uncertainty of fund returns.

According to Morningstar's classification, domestic bond funds can be divided into ordinary bond funds and short-term debt funds. The bond portfolio of short-term debt funds lasts less than 3 years, so its risk-return characteristics are generally lower than those of ordinary bond funds.

the credit quality of a bond fund depends on the credit rating of the bonds it invests in. Investors can at least learn from the following aspects: (1) the restrictions on the credit rating of the bonds invested in the fund prospectus; A description of the credit rating of the bonds held in the fund portfolio report.

For domestic bond funds, investors especially need to know the proportion of convertible bonds and stocks they invest in. The fund holds more convertible bonds, which can improve the profitability, but also amplify the risk. Because the price of convertible bonds is affected by the linkage of positive stocks, the fluctuation is greater than that of ordinary bonds. In particular, the return rate of funds holding a large number of convertible bonds may be far greater than that of bond markets. On the other hand, most ordinary bond funds can hold a certain proportion of shares by participating in the subscription and issuance of new shares, debt-to-equity swaps, and individual funds can also hold certain shares through secondary market investment, so the corresponding risks will be amplified.

in addition to the above two points, you should at least pay attention to the performance, risks, who the fund manager is, fees and so on of bond funds. Cost is very important, especially for low-risk income varieties, and the rate has a great influence on the final actual return. At present, many bond funds have different charging models, and investors should consider their own situation when making choices.