When we talk about investment funds, most people's first concern is how much money to make. Will it earn more than stocks? How soon can it double? In other words, the first concern is income, which is of course no problem. We invest only to make money and increase the value of our assets.
However, in the real investment practice, we will find that risks are closely related to returns, and it is also possible that all of us are unwilling to face them. Risk and return are twin brothers. The so-called risk is the uncertainty between the investment goal and the investment result, that is, the possibility and degree of loss. In the process of investment, in addition to blindly paying attention to income, we need to fully understand the risks of investment products, and even considering risks is more important than considering income.
We all know Warren Buffett's name. Butterfield's teacher is Graham, a big shot in the investment field. Graham once warned Buffett about two laws of investing in iron: first, never lose money; Second, never forget the first. This is also one of the most important investment principles that Buffett learned from his teacher Graham. The real significance of these two investment principles is to tell everyone the importance of risk. In the process of investment, the most important thing for us as investors is not to pay attention to how much money we have earned, but to ensure that our principal will not suffer losses and put risks first.
Fund investment is equivalent to a portfolio. Buying a basket of standardized financial products such as stocks and bonds can achieve the purpose of diversifying investment and risk, but there is still a greater possibility of loss, especially the investment of active funds such as stock funds. Therefore, active funds are also high-risk investments.
Fund volatility index
Since risk is so important, how should we measure and judge the risk of a fund? Here is a basic index to measure the risk coefficient of funds: volatility.
Volatility is the basic index to evaluate financial products, which is also called standard deviation in statistics. Standard deviation is a concept to measure random variability, and it is a measure of the degree of change in the return on investment of the underlying assets. Statistically speaking, it is the standard deviation of the return on investment of the underlying assets calculated by compound interest.
It may not be easy to understand this. We just need to know that volatility represents the change of income, which is actually equivalent to risk. Volatility represents the degree of change in income. The greater the fluctuation, the more drastic the change of income, that is, the more drastic the rise and fall of the fund, which also represents the higher the risk coefficient of the fund. On the other hand, the smaller the fluctuation, the smaller the change of income, and the relatively stable rise and fall of the fund, that is, the smaller the fund risk.
When using the volatility index, we need to define an evaluation interval. There are two funds, A and B. When evaluating the volatility of Fund A, we use the volatility data of one month, and when evaluating Fund B, we use the volatility data of one year. The data of A is greater than that of B, so you can't conclude that the risk of A fund is higher than that of B fund, because you use different evaluation time periods.
When we measure the volatility, we usually choose the same time period, which is generally measured by the volatility of one year. The data of volatility can be viewed through the fund details pages of major fund platforms.