What is a long-term debt fund?
The long-term debt fund is simply a bond fund with a long duration. Long-term bonds have a long investment period and generally need to be held for one to two years. Due to long-term holding, the price of long-term bonds is more sensitive to interest rates. Once the central bank raises or lowers interest rates or the market interest rate changes, the expected rate of return of long-term debt funds will be greatly affected. Therefore, the risk of long-term debt funds is higher than that of short-term debt funds.
The difference between long-term debt funds and short-term debt funds
First, the difference between security.
In addition to investing in bonds, long-term debt funds can also invest in convertible bonds and a small number of stocks, while short-term debt funds only invest in short-term bonds and do not involve the equity market. Therefore, the security of long-term debt funds is not as good as that of short-term debt funds.
Second, the difference of expected rate of return.
The expected return of long-term debt funds fluctuates greatly, while the expected return of short-term debt funds is relatively stable. Generally speaking, when the bond market is bullish, the expected return of long-term debt funds is higher; In the bond bear market, the losses of short-term debt funds are even smaller.
Third, the difference between handling fees.
Long-term debt funds charge fund subscription fees and redemption fees, while short-term debt funds, like money funds, do not charge fund redemption fees.
Third, the difference in redemption time.
Redemption funds of long-term debt funds will arrive within five working days, and redemption funds of short-term debt funds will arrive within two working days, so the flexibility of short-term debt funds is better.
Generally speaking, the expected return of long-term debt funds is higher than that of short-term debt funds, but the risk is also greater. If investors can hold it for a long time, it is more cost-effective to choose a long-term debt fund.