Fund is an investment tool, and making money is its basic function and significance. Equity funds gain income by pooling investors' funds to invest in the stock market, and the value of the fund is ultimately determined by the value of the stocks invested. The theoretical basis of fund's long-term investment profit is the long-term historical trend of stock price rising continuously, not the short-term market performance. However, this does not mean that investment funds will not lose money in the short term, which is what we call investment risk.
While the stock market is rising for a long time, its short-term changes also have the characteristics of jumping. The so-called gap means that the stock price fluctuates greatly in the short term. To put it more simply, the stock market is mixed. However, limited by the fund contract, the funds invested by partial stock fund assets in the stock market often have to reach a certain proportion, such as 60%. This means that at the high point of the stock market, a considerable proportion of investment funds must also be used to buy stocks. If the market then falls, the net value of the fund will also fall accordingly. This happened in the domestic stock market in 2004.
During the market downturn from April 2004 to June 2005, the Shanghai Composite Index fell by 42.69%, the open-end equity funds fell by 20.42%, the open-end partial-share hybrid funds fell by 17.74%, and the open-end bond funds also fell by 4.79%.
The second "to know" is that the fund's ability to make money is uneven.
When the stock market is in a bull market, almost all funds can make huge profits, which makes investors earn a lot of money. But in fact, the ability of funds to make money is uneven, especially in the bear market, only a few funds can win positive returns for investors. This difference can only be seen through the comparison of historical performance. It is best for investors to choose those funds that have experienced a complete round of bull-bear market conversion test to invest.
In the three years from 2004 to now, the domestic stock market has undergone a thorough bear-cow transformation, and some excellent funds have also stood out in the test of stock market ups and downs. At present, well-known domestic fund rating companies Morningstar and Lipper also provide fund rating results for up to three years, and investors can make their own choices according to these results. However, the development of standardization fund in China is only eight years after all. Among the more than 300 funds that have been established, there are less than three-year-old funds 120. Many funds issued in 2006 have just encountered a bull market. It should be said that the China stock market, which is famous for its huge fluctuations, has just started to test these funds, so investors should be cautious when choosing these funds.
The third "to know" is that fund management companies are also enterprises.
The fund management company is the fundraiser of fund products and the manager of the fund. Its main responsibility is to be responsible for the investment operation of fund assets according to the agreement of the fund contract, and strive for the maximum investment income for fund investors on the basis of controllable risks. The day-to-day operation of fund management companies is strictly supervised by regulatory agencies (mainly the CSRC), but this cannot completely avoid possible business risks.
In essence, a fund management company is first and foremost an enterprise. Since it is an enterprise, profit is its instinctive purpose. Because the income of fund management companies mainly comes from management fees based on asset size, it leads to the impulse to expand asset management scale in order to increase management fee income. When the stock market is at a high point, investors are often most interested in investment funds. At this time, investors should pay more attention to the behavior of a few fund companies to carry out illegal marketing promotion for their own profits and cater to investors' irrational needs.
If the scale of funds managed by fund management companies expands rapidly, it is often necessary to increase investment in research, risk control and back-office support in time to ensure that the quality of asset management does not fluctuate greatly. This should also be a question that investors should consider when investigating fund companies in the current situation that funds are highly sought after.
Finally, the fund industry has not been established for a long time, and the competition and changes in the industry are very fierce. In other words, it is insufficient to measure the quality of a fund company simply by old companies and new companies, large companies and small companies, joint ventures and domestic companies, which also increases the difficulty for investors to choose funds.