In a volatile market, whether to redeem profit-making funds or continue to hold on
Recently, the market has continued to correct, and many fund products have also experienced relatively large net value declines. So do we novices want to redeem the funds we still hold now? The editor here summarizes whether to redeem profit-making funds or continue to hold on in the volatile market for your reference. I hope you will gain something from the reading process!
The reasons for this round of decline
Before considering whether we should redeem fund products, we need to first analyze the reasons for this round of market decline.
To summarize briefly, the recent market decline is mainly due to the excessive growth of core assets in the past two years and the inherent need for adjustment. Moreover, the yield on long-term U.S. bonds has recently increased, becoming core assets represented by consumer medicine and so on. Key factors for downward valuations. It should also be noted that domestic monetary policy has shifted from loose to neutral, with expectations of marginal tightening.
We expect market volatility to increase this year and overall earnings expectations to be lower than last year. However, there will still be structural investment opportunities in the market, and the opportunities may come more from the improvement of the performance of listed companies rather than purely from the improvement of valuations.
The relationship between fund holding time and income
After understanding the main reasons for this round of decline, we can take a look at the relationship between fund holding time and income. . This will help us analyze whether we should redeem the current fund product.
The big difference between actively managed funds and stocks is that the price of stocks will be affected by factors such as profitability and industry development prospects, and there will be a ceiling. However, in theory, there is no ceiling for the net value of the fund. .
This is because when fund managers judge that the stocks they hold are overvalued, they can choose to sell them and then pick up high-quality stocks that are undervalued. Therefore, as long as there are still investment opportunities that can be explored in the A-share market and the fund manager has excellent investment capabilities, the fund should be worthy of our continued investment.
And from our data analysis, historical data shows that the longer the fund is held, the higher the probability of positive returns and the total rate of return. Taking the ordinary stock fund index as an example to calculate, the holding time of the fund is selected as 3 months, 6 months, 1 year, 2 years, 3 years and 5 years. It can be seen that the probability of obtaining positive returns increases from 60% to 60%. 90%, and the average holding income increased from 5.29% to 65.56%.
Should we redeem the products we currently hold?
After understanding the reasons for this round of decline and the relationship between the fund holding period and income, we can combine it with our own account situation and risk tolerance to determine whether the fund products currently held should be redeemed.
For some friends with relatively low risk appetite, although they know that long-term holding has a high probability of profit, the highly volatile market will still give people a very painful feeling. If you are not optimistic about the next market trend at this time, you can consider redeeming part of the fund at this stage first, mainly to maintain the previous profits or minimize losses, so as to avoid letting the investment affect your daily life; you can also make appropriate adjustments Allocate your own major categories of assets, increase the proportion of stable products in the account, and reduce the volatility of the account.
For those who have a relatively high risk appetite and believe in long-termism, they should try to relax their mentality when facing short-term market fluctuations. As long as the core investment logic of the assets in their hands has not changed, they can choose to continue to hold and wait. rebound. If there are no problems with the fundamentals of a company, there is a high probability that it will rise again after short-term adjustments. For long-term investors, investment performance is more suitable to be measured on a 3-5 year scale. Do not judge the quality of a fund based on its short-term performance of one or two months.
In the past two years, the returns of funds purchased by many investors have generally been unsatisfactory. What caused the substantial losses of most funds? Regarding these questions from investors, Li Ying, an analyst at the Shanghai Securities Fund Evaluation Center, pointed out , First of all, the fund product is essentially a basket of securities investment portfolios, and the fund's return performance is inseparable from the performance of the underlying underlying market. In the market environment where the stock market continues to decline, it is difficult for stock funds, hybrid funds, etc. that mainly invest in stocks to achieve positive returns. When the stock market rises, most equity funds tend to achieve positive returns. Therefore, it is impossible for the fund to create a myth and create high positive returns under the continuous market decline in recent years.
From the perspective of long-term performance, in most cases, the overall performance of funds is better than that of individual investors. Especially in bull markets and volatile markets, the comparative advantages are more prominent. For example, in 2006 and 2007, more than 80% of stock funds achieved returns of more than 100%, while the proportion of individual investors was less than that of nearly 50% of stock funds in 2012, which achieved returns of 5% to 30%. Returns, and surveys show that more than 50% of individual investors have losses ranging from 5% to 50%. Therefore, funds are still a better investment tool for individual investors to participate in the capital market.
No matter whether it is China’s stock market construction, economic development or various problems in the asset management industry, they cannot be eliminated in the short term and require the rationality of the overall market to promote them.