How much does the fund lose before liquidation_Why does the foundation lose money

What exactly does fund loss mean? Why does the foundation lose money? How much of a fund loss will lead to liquidation? The following is The editor has compiled for you how much the fund lost and liquidated the position. I hope it can help you to a certain extent.

How much loss does a fund liquidate?

There is no certain loss standard for fund liquidation, because the investment strategy, risk tolerance and operating rules of each fund may be different. Generally speaking, fund management companies will clearly stipulate the liquidation situation and handling methods of the fund in the fund contract or prospectus.

There are many reasons for fund losses. The following are some common reasons for fund losses:

Market risk: The prices of assets invested by the fund, such as stocks and bonds, fluctuate in the market. Larger, unfavorable market conditions lead to a decline in the value of the fund's assets.

Industry and company risks: Risks faced by certain specific industries or companies, such as fierce industry competition, technological changes, poor management, etc., may cause the value of related assets held by the fund to decline.

Management capability risk: The investment decision-making and operational capabilities of the fund manager may affect fund performance. If the fund management team has insufficient capabilities or the investment strategy is wrong, it may lead to fund losses.

Liquidity risk: The assets invested by the fund have insufficient liquidity in the market and cannot be liquidated or sold quickly, resulting in losses.

Credit risk: The bonds or other fixed income products invested by the fund may face the risk that the issuer is unable to repay the principal and interest, resulting in the depreciation of the fund assets.

Macroeconomic risks: Changes in the domestic and foreign macroeconomic environment, policy adjustments and other factors may have an impact on fund investment, resulting in losses.

What is liquidation?

Before understanding fund liquidation, let’s first understand what “liquidation” means. Simply put, liquidation refers to the phenomenon of investors being forced to liquidate their positions due to insufficient funds in leveraged trading. In the stock market, we often hear the concept of "short selling", which means that investors can make profits by borrowing stocks and selling them. However, if the stock price rises and investors need to purchase more stocks to return them to the lender, if the funds in the account are insufficient to purchase more stocks, the position will be forced to be liquidated. This situation is called "liquidation".

Under what circumstances will a fund liquidate?

A fund may liquidate under the following circumstances:

1. Large-scale redemption: when the fund invests When investors request to redeem their shares one after another, if the fund manager is unable to meet the large number of redemption requests, resulting in a sharp shrinkage in the size of the fund and the inability to continue normal operations, a liquidation may occur.

2. Excessive investment losses: If the assets in the fund's investment portfolio suffer heavy losses, such as a sharp drop in prices or defaults on stocks, bonds, etc., resulting in a sharp decline in the net asset value of the fund, reaching the level required by the fund contract or supervision According to the risk warning line set by the department, the fund may be required to stop redemptions or liquidate, thus triggering a liquidation.

3. Leverage risk: Some funds use leverage operations, that is, borrowing funds for investment. If the prices of the assets held by the fund fall and the borrowed funds cannot be repaid, causing the capital chain to break, and the fund has no other response measures, a liquidation may occur.

4. Highly concentrated investment portfolio: If the fund's investment portfolio is highly concentrated in a certain industry, company or asset, and the industry, company or asset faces serious risks or emergencies, such as major Defaults, scandals, etc. may cause the fund to suffer huge losses and increase the risk of liquidation.

It is worth noting that fund liquidation is not the norm, but there is a certain probability in times of large market fluctuations or harsh environments. In order to reduce risks, investors should choose funds that meet their own risk tolerance, conduct appropriate diversification of investments, and pay close attention to the operation of the fund and market conditions.

Characteristics of Hedge Funds

The concept of hedge funds is still relatively broad, and many financial products are actually operated by hedge funds. Hedge funds use leverage to operate larger amounts of investments. Hedge funds can also short-sell. The handling fees are generally relatively high, including management fees and sharing fees.

Hedge funds are not guaranteed profits. Hedge funds mostly belong to private investment companies, and their leverage will be higher. Therefore, hedge funds are mainly suitable for institutional and individual clients with large amounts of funds. They are general investments. Investors often find it difficult to bear the risks.

What does it mean to buy at the bottom of a fund? Fund buying at the bottom refers to the behavior of investors who believe that the net value of the fund will not continue to fall after a long-term decline in the fund, so they buy. Once they succeed in buying the bottom, they will get good returns. On the contrary, if you fail to buy the bottom, you will be trapped halfway up the mountain.

Investors can conduct bargain hunting operations based on the following factors:

1. Buy based on the market conditions of the fund, that is, when the market conditions begin to rebound after a long period of decline. , investors can choose to buy at the bottom.

2. The trend of the fund is affected to a certain extent by the fund’s underlying assets. That is, when the fund’s underlying assets rise, it will drive the fund to rise. When the fund’s underlying assets fall, it will cause the fund to fall. Therefore, , investors can choose to conduct bottom-buying operations when the fund's underlying assets end their downward trend and begin their upward trend.

At the same time, investors should reasonably control their positions when carrying out bargain hunting operations. It is best to buy small positions in batches and never buy full positions. This can leave enough positions to deal with the later stages of the fund. Risks brought by trends.

What is the impact of fund liquidation on investors?

1. They will lose money. When the fund liquidates, the equity in the investor's margin account will be negative, indicating that the liquidation will result in losses.

2. There is no way to remedy it. When a position is liquidated, the system will force the position to be liquidated. The fund cannot handle the redemption, and investors need to bear all losses.

But under normal circumstances, the chance of a fund liquidation is very small. When purchasing funds, investors should pay attention to the fund's historical performance and operating conditions to avoid buying funds that may be liquidated.

If the investment fund is currently in a state of loss, but there is a rebound trend in the future, investors can consider appropriately covering their positions and increasing their investment amount. This applies to fund products with excellent historical performance and good management. On the other hand, if investors do not want to take high risks, it is recommended to choose low-risk funds from the beginning.

Is it likely that the fund will lose a negative number? If the fund's operating conditions are not good and continues to decline, it will be liquidated after certain conditions are met, so the chance of a negative loss is very low. Basically This rarely happens. According to relevant regulations, if the net asset value of a fund is less than 50 million yuan for 60 consecutive days, it may be liquidated.