Bond fund refers to a fund that specializes in investing in bonds. By pooling the funds of many investors, it makes portfolio investment in bonds and seeks relatively stable returns.
In China, bond funds mainly invest in government bonds, financial bonds and corporate bonds. Usually, bonds provide investors with a fixed return and repay the principal at maturity, and the risk is lower than that of stocks. Therefore, compared with stock funds, bond funds have the characteristics of stable income and low risk.
By the second quarter of 2003, there were 1 1744 global bond funds, with net assets of $2,860 billion, accounting for 23% of the net assets of global * * * funds, while in the fourth quarter of 2002, the proportion was 22%. According to the statistics of the American Association of Investment Companies, as of September 2003, there were 2,056 bond funds in the United States, with a net asset value of 123 10 billion US dollars, accounting for about 18% of the net asset value of similar funds in the United States, while the ratio was 16% at the end of 2002.
In China, the development of bond funds has just started. At present, only a few bond funds such as Huaxia Bond Fund, Harvest Financial Bond Fund, Huabaokang Bond Fund and Dacheng Bond Fund have been established and issued.
To know how to choose a bond fund, you must first know what a bond is. Investing in a bond is equivalent to lending it to the issuer of the bond. When the bond expires, it will repay the principal and earn interest income regularly, such as once every six months. The maturity of bonds and the repayment ability of issuers are the two most important factors in bond investment.
Therefore, the two major factors affecting the performance of bond funds are interest rate risk, that is, the sensitivity of the bonds invested to interest rate changes (also known as duration) and credit risk.
When choosing a bond fund, we must understand its interest rate sensitivity and credit quality. On this basis, we can understand how high the risk of the fund is and whether it meets your investment needs. Morningstar focuses on these two points when evaluating the investment style of bond funds.
Interest rate sensitivity
The rise and fall of bond prices is inversely proportional to the rise and fall of interest rates. When interest rates rise, bond prices fall. It is necessary to know the change of bond price, so as to know how sensitive the net asset value of bond funds is to the change of interest rate, and the duration can be used as an indicator to measure it.
The maturity of a bond depends on three factors: the maturity date, the cash flow of principal and interest expenses, and the yield to maturity. Duration is calculated in years, but it is different from the term of bonds. With this indicator, you can know how much the fund under investigation has earned or lost because of the change of interest rate.
The longer the duration, the more sensitive the net asset value of bond funds is to the change of interest. If the duration of the bond fund is 5 years, if the interest rate drops 1 percentage point, the net asset value of the fund will increase by about 5 percentage points; Conversely, if the interest rate rises by 1 percentage point, the net asset value of the fund will lose 5 percentage points. For another example, there are two bond funds with a duration of 4 years and 2 years respectively, and the net asset value of the former fluctuates about twice as much as that of the latter.
Characteristics of bond funds
(1) Advantages of bond funds.
Ordinary investors can easily participate in the investment of inter-bank bonds, corporate bonds, convertible bonds and other products. These products have various inconvenient restrictions on small funds, and buying bond funds can break through this restriction.
(2) When the stock market is in a downturn, the income of bond funds is still very stable and is not affected by market fluctuations. Because the product income invested by bond funds is very stable, the corresponding fund income is also very stable. Of course, this also determines that its income is subject to the interest rate of bonds and will not be too high. At present, the annual interest rate of corporate bonds is around 4.5%, and the annual rate of return can be guaranteed to be between 3.3% and 3.5% after deducting the fund operating expenses.
(2) The shortcomings of bond funds.
(1) Only when it is held for a long time can it obtain a relatively satisfactory return.
(2) When the stock market skyrocketed, the income remained stable at the average level, which was lower than that of equity funds. When the bond market fluctuates, there is even the risk of loss.