Bond funds refer to funds that mainly invest in fixed-income financial instruments such as treasury bonds and financial bonds (accounting for more than 80% of fund assets). Although the income is relatively stable, there are still some risks. This paper will introduce four risks of bond funds.

What are the risks of bond funds?

1 interest rate risk

Bond prices are closely related to changes in market interest rates and change in the opposite direction. The longer the average term of bond funds, the higher the interest rate risk of bond funds;

2 credit risk

Refers to the risk that the bond issuer cannot pay interest and repay the principal on time at maturity. When the credit rating of a bond drops, the price of the bond will drop, and the net value of the fund holding the bond will also drop;

3 Early redemption risk

When the market interest rate falls, bond issuers can raise funds at lower interest rates, so they will repay high-interest bonds in advance. Funds holding early redemption bonds not only can't get high-interest income, but also may face the risk of reinvestment.

4 Inflation risk

Inflation will devour the purchasing power of fixed income, that is, the income from buying this fund can't match the current price, so investors in bond funds can't ignore this risk.