First, investing in bond funds can buy more "good" bonds.
Individuals can invest in fewer types of bonds than bond funds. Individuals can only buy bonds traded over the counter or on exchanges, and cannot buy or sell treasury bonds and financial bonds traded in the interbank market. If you invest in bond funds, you may "buy" many corporate bonds with higher expected annualized interest rates, or "enter" the inter-bank bond market to buy and sell financial bonds and government bonds traded there in order to obtain higher expected annualized expected returns.
Secondly, by investing in different types of bonds, we can create more potential expected annualized expected returns than a single bond.
Thirdly, investing in bond funds has better liquidity than investing in a single bond.
Generally speaking, bonds are repaid at maturity. If you invest in treasury bonds traded over the counter of banks, once you need money, the handling fee for selling bonds is relatively high. By indirectly investing in bonds through bond funds, you can get higher liquidity and redeem your own bond funds at any time, with relatively low cost.
What are the advantages of bond funds?
1. Bond fund is an investment and financial management tool with moderate risk and expected annualized expected return.
2. Compared with low-risk wealth management products such as time deposits, bond funds are not limited by fixed term, and can be purchased or redeemed at any time after normal operation, with good liquidity.
3. Compared with high-risk wealth management products such as stocks and equity funds, the volatility of bond funds is relatively low.
Due to the weak correlation between the bond market and the stock market, bond funds can partially avoid the risks in the stock market, which is an ideal tool for constructing investment portfolio and smoothing investment risks.
How to invest in bond funds?
As a part of investors' asset allocation, bond funds must gradually develop good investment habits if they want to play their role in diversifying risks. Specifically, there are the following key steps:
The first step is to understand your investment objectives and risk tolerance, and determine the proportion of bond investment allocation to all assets.
The second step is to understand the basic characteristics of bond funds, especially the distribution and composition of bond portfolio in credit rating and term. The lower the credit rating of the portfolio, the higher the expected annualized rate of return of the fund, but the greater the default risk of the bond issuer. At the same time, the longer the portfolio term, the greater the risk of expected annualized interest rate changes faced by the fund.
The third is to understand the professional knowledge of fund managers and only entrust funds to those investment managers with good risk control ability and consistent historical performance.
Fourth, we should regularly review the investment portfolio and adjust the allocation of funds invested in bond funds when necessary.