Economic Wisdom to Apply in Your Twenties

Chapter 40

Chapter 5 Section 4 Funds, let financial experts help you make money

In 2007, when the fund was hot, 27-year-old Yang Tao also knew that there was a product called fund that was helped by experts to manage money.At that time, he followed the advice of experts that "to buy a fund, you must buy a brand-name fund", and chose a brand-name fund with good performance, good reputation, and good price.Sure enough, the fund rose all the way with the great bull market in 2007, and Yang Tao also tasted the sweetness of fund investment.

Therefore, Yang Tao invested more money in speculation funds, dreaming of making a fortune.It's a pity that the good times didn't last long. Not long after Yang Tao's wishful thinking, the subprime mortgage crisis broke out in the United States. As soon as he figured out what was going on with this loan, the stock market began to plummet all the way, and Yang Tao's profits on the fund disappeared in an instant.

Perhaps Yang Tao's experience is what many young people in their twenties have experienced.Even if you have never been in contact with financial securities, even if you have no understanding before, you must have gradually become familiar with hot stocks and funds around 2007.

Funds are managed by professional investment experts - fund managers. They have a professional analysis and research team and strong strength, and generally adopt diversified investment, so funds are less risky than stocks, and their returns are more stable.

Like stocks, bonds, time deposits, foreign exchange and other investment tools, securities investment funds are also a channel for investment.Compared with other investment tools, the fund pools the funds of many investors, which is conducive to taking advantage of the scale of funds and reducing investment costs.The fund is managed and operated by the fund manager. The fund manager generally has a large number of professional investment researchers and a strong information network, which can better carry out all-round dynamic tracking and analysis of the securities market.

Funds can often clearly tell investors where such funds will invest, whether the profits will be more or less, and whether the risks will be large or small.Investors can choose different types of funds according to their own desires, depending on how much profit they want to make and how much risk they want to take.

If you have never bought a fund, or you may not have a comprehensive understanding of the fund, then experts suggest that you pay attention to the following three elements when buying a fund:

1. Establishment of investment principles.The establishment of investment principles varies from person to person, mainly including the purpose of investment, the longevity of time, and the tolerance of risk.Before applying for a fund, you need to determine the purpose of the investment, whether it is for studying abroad, buying a new house, or earning more "milk powder money" for the baby who is about to be born. Different goals are directly related to the formulation of investment strategies.Longevity refers to how long you can use your investment assets without pressure, while risk tolerance refers to the price volatility you can tolerate.

2. Determination of investment philosophy.The correct fund investment philosophy includes indexed investment, diversified investment and long-term investment.We must discard the illusion of beating the market, give up unnecessary attempts and efforts, and establish a correct and healthy investment mentality.Investment diversification can improve the stability and reliability of investment income, reduce price volatility and investment risk.At the same time, we should abide by the concept of long-term investment and avoid frequent trading.

3. Formulation and implementation of investment plans.The process for investors to establish investment principles and find their own investment direction is also the process of formulating investment plans.After formulating the investment policy, pay attention to regularly review the structural changes of the investment portfolio, and decide whether local adjustments are required to maintain the established "return and risk" structure.

In addition, regarding the question of whether to buy new funds or buy old funds, experts suggest that "buy old funds in a bull market and new funds in a bear market. This is a principle that needs to be followed."When the market is in a rising market, usually the rate of return of buying new funds will not be higher than that of old funds, because new funds need time to build positions, and when building positions, they also provide rising support for stocks held by old funds.In a falling market, buying new funds can be better than old funds, because new funds can obtain stable returns by delaying the establishment of positions, buying new stocks, and buying bonds.

It introduces a lot of knowledge about funds, but it may still seem too abstract for you who have never bought a fund.The key to investing is to use these skills and rules in actual combat. Therefore, if you are interested in investing in funds, you might as well buy a fund as soon as possible. "The investment method, what kind of benefits can it bring you.

Wisdom Trivia: "Quasi-Stocks" (Funds) Are Different From Stocks
1. Different authority: stock investors have certain direct management authority over the stock issuing company.However, fund investors have no direct relationship with the fund's investment objects and cannot intervene in their specific business activities.

2. Different reversibility: After the stock is issued, it can only be circulated in the stock exchange market, and it cannot be reversed to the company that issued the stock; on the contrary, the open-end fund can be reversed at any time, and the closed-end fund can also be returned within a certain period of time. To the fund management company, return the principal.

3. Different profit levels: The profit of stock investment is closely related to the operating conditions of the stock issuing company; the fund obtains relatively stable returns according to its investment share.Funds are not as profitable as stocks.

4. Different risk levels: stock investment is affected by the operating efficiency and market conditions of the companies it invests in, and it is the riskiest among all investment forms.The income of stock investment is directly related to the profit and loss of listed companies; while funds are investors entrusting fund management companies to invest in stocks or other aspects, which can save transaction costs and increase investment returns.

(End of this chapter)