The fluctuation of a single stock is relatively large. In order to reduce the volatility risk of a single stock, you can buy multiple stocks at the same time. Some stocks go up and some stocks go down, so we can enjoy relatively stable returns while reducing fluctuations. This is the idea that fund investment pursues long-term returns and long-term trends.
The ups and downs between stocks are not completely independent. Under the influence of the overall environment, diversified equity funds cannot avoid such risks. But time can balance the risk of short-term market fluctuations, such as 10% decline in the first half of the year, 10% increase in the second half of the year, and 1% in one year. Therefore, the risk of stock fund investment also depends on whether you make long-term investment or short-term investment. The long-term investment risk is small, and the short-term investment risk is large.
Past earnings cannot represent future earnings, and the future is uncertain, but it must be judged by past earnings.
There are risks in the short term, and the risks are great; In the long run, the risk is small. Although we take stock funds as an example, it can also be mapped to the whole fund market. Even other types of funds are less risky.
Compared with other funds, stock funds have higher expected returns and higher risk coefficient, while bond funds and monetary funds are much more stable. For a fund portfolio, the greater the share of equity funds, the greater the risk. There is no such thing as high income and low risk.
In order to reduce the risk, we must rely on extending the investment period. I suggest that this part of the investment fund be used as a pension supplement or an education fund, because we can enjoy the long-term income of the fund for a longer period of time, and the long-term income is the fundamental goal of fund investment.