What is an index grading fund?
This kind of fund is a graded fund product based on indexed investment, in which the graded share contains leverage mechanism, and it has the opportunity to obtain the expected return on investment beyond the index when the market rises, and it is an innovative variety of index funds.
There are three mainstream operating strategies of index grading funds: long-term holding, band operation and arbitrage trading.
Is the index grading fund risky?
As a high-risk investment fund, index fund has a high risk level, so where does the risk of index fund come from?
1, investment risk
Graded funds divide the basic shares into sub-shares with different characteristics of expected return on risks, but still invest the fund assets as a whole, which will lead to risks in the investment process. Coupled with the high risk of index funds, the investment risk is still relatively large.
2. Credit risk
Although the sub-shares with lower expected returns of graded funds have the characteristics of low risk and relatively stable expected returns, they may still face the credit risk of the issuer's default, which makes investors unable to obtain the agreed expected returns or even lose the principal.
3. Leverage risk
High leverage has two sides. When it rises, it can amplify the expected return, but once it falls, the investment loss will also be amplified.
4. Estimation error
Due to the limitation and incompleteness of valuation, the estimation of the reference net value of graded shares can not fully reflect the true value of graded shares, resulting in errors.
The above is what the index grading fund is and how risky it is. I hope it helps you. Warm reminder, financial management is risky and investment needs to be cautious.