Open-end funds must set aside some bank deposits, which are stipulated in the fund contract and prospectus, such as 65-95% stock investment and 5% cash. This part of the money is to meet the redemption of daily investors. If someone redeems the fund, they will withdraw it directly from this part of the money.

When the subscription amount of the fund on that day is greater than the redemption amount, a net subscription is formed.

When the redemption amount of the fund on that day is greater than the subscription amount, it is a net redemption.

Net redemption will lead to a 5% reduction in cash, and fund companies must maintain a minimum of 5% cash. If the redemption amount is huge, it is necessary to sell other securities assets on the same day to deal with the redemption, which will generate transaction costs and affect the overall investment plan. Therefore, reserving 5% cash can basically meet the daily redemption.