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. The following is how the bond funds organized by Bian Xiao get income, hoping to help you!

How do bond funds get income?

1, interest income

The bonds held by the Fund will generate interest income during the holding period.

Bonds with different credit ratings and different maturities have different yields. The higher the credit rating, the lower the risk and the lower the coupon rate (the interest rate marked on the bond); or vice versa, Dallas to the auditorium

2. Capital gains

By buying and selling bonds, the bid-ask price difference is obtained, so as to obtain excess returns, and the realized liquidity can be reinvested to obtain bonds with higher interest.

3. Bond repurchase income

Through the repurchase business, the bonds held will be pledged for financing, and the funds will continue to be invested in the bond market, which can obtain leveraged returns.

4. Income from stock investment

In addition to pure debt funds, partial debt funds can participate in stock investment, which increases the profit source of the fund.

5. The appreciation of convertible bonds

When the share price of the company holding convertible bonds has an upward trend, the value of convertible bonds will exceed its value as a fixed-income bond, thus having a value similar to that of stocks.

Investment risk of bond funds

1, interest rate risk

Bond prices are affected by changes in interest rates, which change in the opposite direction. As the market interest rate rises, the bond price falls; Interest rates fell and bond prices rose. The longer the maturity of bonds, the greater the impact of interest rate changes and the greater the interest rate risk. Similarly, the value of bond funds is also affected by market interest rates. Generally speaking, the longer the average term of bond funds, the greater the interest rate risk.

2. Credit risk

Credit risk refers to the risk that the bond issuer cannot pay interest and repay the principal at maturity.

Bonds with low credit rating have greater credit risk. If the credit rating of a bond declines, the price of the bond will decline, and the net value of the fund holding the bond will also decline.

3. The risk of early redemption

Early redemption risk refers to the risk that bond issuers may buy back bonds before the maturity date.

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

4. Inflation risk

Inflation will devour the purchasing power of fixed income, so investors of bond funds can't ignore this risk, and must buy some stock funds appropriately.

The difference between bond funds and bonds

(1) The expected annualized income of bond funds is not as fixed as the interest of bonds.

Investors who buy bonds with a fixed expected annualized interest rate will receive fixed interest income on a regular basis, and the principal can be recovered when the bonds expire.

As a combination of different bonds, bond funds will regularly distribute the expected annualized income to investors, but the expected annualized income distributed by bond funds has risen and fallen, which is not as good as the fixed interest of bonds.

(2) Bond funds have no definite maturity date.

Unlike ordinary bonds, bond funds are composed of a group of bonds with different maturities, so there is no definite maturity.

However, in order to analyze the characteristics of bond funds, we can still calculate the average maturity of all bonds held by bond funds.

(3) The expected annualized rate of return of bond funds is more difficult to predict than the expected annualized rate of return of a single bond bought and held at maturity.

The expected annualized rate of return of a single bond can be calculated according to the purchase price, cash flow and the principal recovered at maturity, but the bond fund is composed of a group of different bonds, so it is difficult to calculate and predict the expected annualized rate of return.

Related articles on how bond funds obtain income;

★ What if the comprehensive score of applying for a credit card is not enough?

★ Four common ways to buy funds

★ What fund has the highest income and is stable?

★ What are the valuations of the net value of fund units?

★ Public Offering of Fund's "fixed income+"ushered in the impact of new regulations

★ What are the risks of buying a bond fund?

★202 1 six ways to make money

★202 1 How to get rid of the moonlight quickly through financial management

★ What are the high-yield and stable funds in 2022?