What is the difference between stock funds and fixed income funds?
1, investment strategy
Stock funds usually adopt stock investment strategy, that is, to obtain capital profits by buying shares of listed companies in order to realize asset appreciation. The risks of these funds are relatively high, but the potential returns are also high.
Fixed-income funds adopt bond investment strategy, that is, they obtain fixed income by purchasing various bonds to ensure the safety of principal. These funds are usually low-risk, stable investment options with certain profitability and stability.
2. Risk
Equity funds may be affected by stock market fluctuations, and their value may be affected by market conditions, company performance and other factors. Therefore, equity funds are usually risky and suitable for long-term investors.
The risk of fixed income funds is low, because the principal and income of bonds are usually borne by the issuer. However, their returns are relatively low, and they are suitable for conservative investors or people who need short-term investment.
3. Income
Equity funds usually have higher potential returns, but they are also accompanied by greater risks. The returns of these funds are usually closely related to the performance of the stock market and the performance of the stocks held.
The income of fixed-income funds is usually deterministic, and the yield is determined by the interest rate of bonds, so the yield is relatively stable.
4. Investment cycle
Equity funds usually need a long investment cycle to get better returns. Therefore, equity funds are suitable for long-term investors.
Fixed-income funds usually have a short investment cycle and can obtain fixed income during the investment period. If investors prefer short-term investment or conservative investment, then fixed-income funds may be more suitable.
Which is better?
According to the above analysis of the differences between stock funds and fixed income funds, we can see that these two types of funds have their own advantages and disadvantages, so there is no better statement. For investors who are not sure what kind of fund to invest in, it is suggested to make a clear risk preference assessment and investment plan for themselves first, and then choose a fund type that is more suitable for them to invest. However, it is recommended that novices invest in fixed-income funds first, which is relatively less risky and can be used slowly.
The above are some differences between stock funds and fixed-income funds, so you can pay attention to them.