Fund discount is a problem that investors may encounter when purchasing graded funds, but what does fund discount mean? Is a fund discount good or bad? These problems have always troubled many investors, so let’s take a look at them today.

Fund discount

Fund discount means that in order to protect the interests of A share holders, according to the contract, when the net value of classified fund B share is lower than a certain threshold (most stocks When the lower conversion threshold of the hierarchical fund is set to 0.250 yuan), the hierarchical fund will be triggered to undergo irregular downward conversion.

The A share holder will receive the mother base share, the B share holder’s share will be reduced according to a certain proportion, the A share is converted into a share equal to the B share, and the remaining shares are converted into a net value of 1 Yuan fund of funds. After conversion, trading of sub-shares will be suspended from 9:30-10:30 on the first trading day after the conversion date and on the second trading day.

Is fund discount a good thing or a bad thing?

Fund discount is a requirement of domestic hierarchical funds. The main purpose of establishing fund discount clause is to provide income guarantee for share A and allow b will not completely lose money under extreme leverage conditions. Fund discounts have different impacts on various types of holders.

B share holder: The net value before and after conversion remains unchanged, but because the shares are calculated on a net value basis, the discount and premium will be lost, resulting in large price fluctuations.

A share holders: The corresponding net asset value of the fund remains unchanged after conversion, and the number of A shares held decreases. If the share of the parent fund increases, the discount and premium of the A share price assets will also be lost, resulting in greater Amplitude fluctuations.

Fund fund share holders: The net asset value of the fund of funds held before and after conversion remains unchanged. Holders of shares of on-market and off-market parent funds obtain shares of on-market parent funds.

Note: Do not wait until the base day of the discount. It will have already dropped to the limit by then, and there will be no chance to sell, let alone participate in the discount, so try to avoid participating in the fund's discount to reduce risks.

That’s it for the above content about fund discounts. I hope it will be helpful to everyone. Warm reminder, financial management is risky, so investment needs to be cautious.