How much does the fund buy?
Compared with stocks, funds are already diversified, and the more funds you buy, the better. Moreover, in fund investment, the more holdings, the more dispersed the investment risk.
Transaction cost of 1: fund investment is often costly. If we cast a wide net to hold dozens or even hundreds of funds, it will mean that the transaction cost will rise sharply, especially if we are not making long-term investments, day trading will make the transaction investment cost wasted.
2 Decentralization: If you buy hundreds of funds, you may have covered most A shares. It is better to buy a large-cap index fund, which is not only simple and convenient, but also cheaper.
And the more money you hold, the more dispersed the risk. According to a survey conducted by Morningstar Fund Rating Agency in the United States, if you hold four randomly selected equity funds, the volatility of your portfolio will drop significantly. When the number exceeds 10, the fluctuation amplitude does not decrease obviously.
(Source: Tian Tian Fund)
3 Repeated investment: We should know that different funds are likely to hold many of the same stocks, especially different funds with the same theme, and the repetition rate of their positions may be very high. Therefore, we'd better try to avoid buying homogeneous funds with similar themes, styles and investments.
Generally speaking, fund diversification can indeed reduce risks, but it is best not to be too diversified. It is suggested that the number of funds should be controlled at about 4- 10, and we should pay attention to avoiding repeated investment as much as possible, otherwise it will not only effectively reduce risks and increase transaction costs, but also waste our time and energy in selecting investment targets and operation management, and it is also very troublesome to operate.