You can look at a practical indicator called "maximum retracement". What does it mean specifically?

It is the extent to which the fund's net value falls from its highest point to its lowest point within a certain period of time.

It sounds a bit complicated. Let’s take another example from Xiao Ming to make it easier to understand.

For example, Xiao Ming's math test scores this semester, the highest score is 100 points, the lowest score is 60 points, and other scores are between the two.

Then for his test scores this semester, we can use percentages to calculate his maximum retracement, and calculate the extent to which his highest score falls back to the lowest score, which is about 40%.

In terms of buying a fund, the maximum drawdown refers to how much the fund will fall under extreme circumstances after you buy it.

It should be noted that the maximum drawdown is not your actual loss, but the worst situation that you may encounter if you hold a fund for a long time.

Although it is historical data, the smaller the maximum drawdown, the more it tests the fund manager's ability to manage drawdowns.

The smaller the maximum retracement, the smaller your losses will be.

Just like in a bear market, many stocks on the market have fallen by more than 50%, and the maximum drawdown of the fund you buy is 20%. Losing less means "making more", and your experience will of course be much better.

In addition, we should remind you that the maximum drawdown does not have an absolute range and is generally compared between funds of the same type.

For example, comparing stock funds and stock funds, if the returns of the two stock funds are the same, it depends on which one has a smaller drawdown. The one with a smaller drawdown will have a better experience.

Thinking about it from another angle, under the same market performance, the smaller the retracement, the more resistant the fund is. Then even if it encounters extreme circumstances, the time it takes for the fund to leave floating losses and return to positive returns will be shorter.

If you are interested in an active fund, its maximum drawdown is smaller than similar funds, and its income can outperform the performance comparison benchmark, then the holding experience will be relatively better.

Well, when others recommend funds to you in the future, you can also look at this indicator to avoid being too impulsive.

If you have other questions about fund investment, you can come to my public account Jian Qi Du Cai to find answers.