#Absolute Return and Relative Return

The return target of the fund can be divided into absolute return and relative return.

Relative return, that is, the return of beating the broader market. For example, if the market rises by 10%, the fund can rise by 12%, or if the market falls by 20%, the fund only falls by 20%. So what this type of fund pursues is to beat the market.
Absolute return is the pursuit of absolute positive returns, no matter whether the market is rising or falling. For example, if the market rises by 10%, the fund can achieve an increase of 8%, the market falls by 10%, and the fund can achieve a 2% return, then the fund is always making money, so that the income can be amplified through years of compound interest.

Most of the products related to relative income are public offerings.

Most of the products related to absolute returns belong to private equity. There are fewer and fewer absolute return products in foreign countries, because the difficulty is much more difficult than the relative return, but the absolute return is favored by the rich, because the rich are already very rich, and they are more stable. If a fund product is Absolute income, and the Sharpe rate is very good, then it must be crazy.

#Off-market funds and on-site funds

From the way of trading, it can be divided into on-site funds and off-site funds.

On-market funds are funds traded in the market. Users need to buy and sell through the trading software of securities companies. This type of fund is similar to stocks. During the trading hours, investors decide the timing of the transaction according to the buyer’s quotation and the seller’s quotation. The venue here refers to the secondary market.

For over-the-counter funds, investors can only subscribe and redeem through channels such as bank counters, securities companies, fund company counters, websites and mobile applications. This kind of fund also has only one net value quotation every day.

#Subscription and redemption
Both of these are off-site operations:

Subscription is to use money to apply for the purchase of fund shares.
Redemption is to return the fund shares to the fund and get back the money.

To put it bluntly, when you trade stocks and funds on the floor, you are trading with other traders. The off-site purchase and redemption of funds is a transaction with the fund company.

Subscription and redemption are required to pay handling fees. After the subscription, there will be a period of closure, ranging from a few days to a few years. If you want to redeem in advance, you generally need to pay an additional handling fee.

#The difference between on-site funds and off-site funds

Main difference:

Different ways of trading
On-site funds: Like stock trading, you are trading with other investors through a brokerage.
Over-the-counter funds: You are applying for purchase and redemption from the fund company, no matter what channel you use.
different management fees
On-site funds: The fee rate is relatively low, and the same commission is paid for buying and selling stocks, and there are no subscription fees and redemption fees.
Over-the-counter funds: The fee rate is relatively high, and both subscription and redemption have a fee rate. Generally, there will be a closed period after the subscription, and there will be additional fees if redeemed in advance.
Liquidity makes a difference
On-site funds: Since they can be traded in the market value, the number of buyers and sellers is active, the liquidity is good, and the price changes frequently, which may result in premiums and discounts.
Over-the-counter funds: publish a net value every day.
For people
On-site funds: more suitable for those who are willing to spend some time and energy learning about stocks and enjoying the fun of trading.
Over-the-counter funds: It is more suitable for those who do not want to spend time and energy on stock speculation, but only want to earn a penny.

# unit net value and accumulated net value

#unit net worth

Also referred to as the net value of the fund, it is the current total net assets of the fund divided by the total fund shares. Assuming that a fund is issued after its establishment and raises 1 million, the initial share is divided into 10,000 shares. The initial net value of the fund is 1 million/10,000, which is equal to 100. At this time, suppose you spend 500 yuan to subscribe, and you will get 5 shares.

Then the fund invests with the raised 1 million. One year later, it earns 200,000. At this time, if the share remains unchanged, the net value becomes 1.2 million/10,000=120, and your 500 yuan also changes. It becomes 5*120=600 yuan, and if you want to purchase 1 share at this time, you need to spend 120 yuan.

Of course, these are simplified situations. The actual situation is that the fund may not be able to raise 1 million funds immediately. In addition, the price of the assets purchased by the fund is also changing, and there are people applying for purchase and redemption every day, and the purchase and redemption are not only It will affect the share, and at the same time need to pay fees, these fees will also become part of the total net assets of the fund, so the total net assets of the fund are constantly changing, and the share is also constantly changing, the calculation of the fund’s unit net value is very It is complicated, and fund companies have professionals to calculate it.

Fund companies generally announce the net value of units at least once a day, so that users can decide whether to subscribe and redeem based on the net value. However, some funds, such as closed-end funds, may only be announced once a week or longer.

It is worth mentioning that sometimes large-scale redemption will also lead to large changes in the net value of the fund, because the redemption fee will be included in the total net assets of the fund.

# accumulated net worth

accumulated net worth. Here is still the previous example. The fund raised an initial capital of 1 million to invest, and the initial net value was 100. After one year, it earned 200,000. At this time, the total net assets of the fund became 1.2 million. Assuming that there is no dividend and split shares, Then the net value of the unit at this time is 1.2 million/10,000 = 120, and the cumulative net value is also 120 at this time.

Now the fund thinks that each dividend is 10 yuan. After the dividend, the total net assets of the fund become 1.1 million, and the net value of the unit becomes 1.1 million/10,000=110. However, the cumulative net value has not changed, and it is still 120. How to calculate it? ? It is unit net value + dividends.

At this time, the fund decided to split the shares again, 1 split into 2, then 10,000 shares became 20,000 shares, then the unit net value became 1.1 million/20,000 = 55. So, is there a change in cumulative net worth? The answer is no. At this time, the formula for accumulating net worth is:
Accumulated net value of fund shares on T day = (net value of fund shares on T day + share dividend amount after split) * split ratio + dividend amount before split

So it is (55+0)*2+10=120. In other words, the cumulative net value, whether it is dividends or split shares, will not affect its value. It is an indicator that truly reflects the historical performance of the fund during its operation. , when investors evaluate fund performance, they should pay attention to the cumulative net value of fund shares.

# benchmark index 

To evaluate the performance of a fund, you need to take a reference object. Generally speaking, you will use an index as a comparison, which is also called a benchmark index. Different funds are compared to different benchmark indexes.

For example, you set up a U.S. technology stock fund, but the U.S. stock market already has technology stock ETF funds such as the Nasdaq 100 Index Fund with impressive returns. Why do others invest in you? So you need to prove that you are a fund product that others will buy, then you may need to use the Nasdaq 100 index as a benchmark index for comparison. Generally, when a fund is launched, the benchmark index will be mentioned on the introduction page of the official website, or it will be compared with the broader market index by default.

#Manual Fund and Hedge Fund

Over-the-counter funds in the United States can also be divided into mutual funds and hedge funds.

Mutual Fund, Mutual Fund.
Hedge Fund, Hedge Fund.
Both are funds in essence, raising funds from a group of investors, and then fund managers use these funds to invest, and all investors share the benefits earned and the risks they bear.

The difference is:

The investment threshold is different
Mutual funds: The capital threshold is relatively low, but ordinary people can also apply for purchase. However, mutual funds also have some large capital customers, such as state-level pension funds.
Hedge funds: The capital threshold is relatively high, generally starting at least a few hundred thousand dollars, and there are also net asset requirements. In addition, hedge funds generally have restrictions on the number of applicants and funds. When the number of fund investors exceeds a certain number, or the funds raised exceed a certain amount, the fund may not allow further subscriptions.
Invest in different ways
Mutual funds: generally have strict requirements, because institutions such as pension funds do not want funds to be used for speculation or short selling. Therefore, the investment methods of general mutual funds are relatively simple, transparent, and generally long-term.
Hedge funds: There are more diversified investment methods, such as short selling, options, swaps, and high leverage.

Simply put, hedge funds are a rich man’s game. Compared with mutual funds, hedge funds raise funds from rich people, charge higher management fees, and have higher employee salaries. Of course, the competition is also fiercer. Rich people invest money, and if they cannot make a profit for a few years, they will inevitably withdraw their capital. Therefore, hedge funds are also under great pressure. Hedge funds with a short lifespan are not uncommon, and those hedge funds that have survived for a long time have their own unique trading ideas and strategy.

The people who work in the world’s top hedge funds are top-notch in terms of ability and salary.

#Public and private equity funds

These two are concepts in China, which are actually very similar to mutual funds and hedge funds in the United States, so we can simply think of them as

Cemetery Fund, the mutual fund in China.
Private equity funds, that is, hedge funds in China.

#Open-end funds and closed-end funds

#Close End Funds

Closed-end funds, Close End Funds, referred to as cef, it has several characteristics:

After subscription, it cannot be redeemed and must be held to maturity. Some closed-end funds are listed so they can be traded on the floor.
Once the fund reaches the fundraising target amount or the deadline, it will be closed and no further subscriptions will be allowed. Although such funds can be expanded under special circumstances, the expansion should meet strict statutory conditions.

We know that there will be at least a few days of closed period after OTC fund subscription. You cannot subscribe on the first day and redeem it on the second day. If everyone plays like this, the fund will not be able to use the money to invest. The advantage of closed-end funds is that they do not need to face the problem of redemption by users, and can focus on medium and long-term investment with confidence and boldness. The disadvantage is that users cannot redeem money during the closed period.

Generally speaking, closed-end funds are gradually declining, being replaced by open-end funds and ETFs. The plates are also relatively open-ended and smaller.

#open-end fund

Open-end funds correspond to closed-end funds. This type of fund is the most standard, an over-the-counter fund that can only be purchased and redeemed, and cannot be traded on the exchange.

Mutual funds generally do not use 100% of their investment positions in order to cope with redemption. Especially sometimes large-scale redemption has a relatively large impact on net worth.

#Listed open-end fund (LOF)

As mentioned earlier, general open-end funds can only be purchased and redeemed off-site, and cannot be traded on-site. China Innovation has invented a listed open-end fund, the English name is Listed Open-Ended Fund, or LOF for short.

#ETF

ETF fund, this is currently the most popular type of fund, the English name is Exchange Traded Fund. As the name suggests, this kind of fund is a fund that is traded on the exchange by nature. Most of the funds on the market are ETF funds, especially in the US stock market, there are about 2,000 ETFs.

If the ETF fund is an index fund and tracks a basket of stocks, then it can be purchased and redeemed off-site, but here the purchase and redemption cannot be done with money, but with a basket of stocks, such as the SSE 180 ETF that tracks 180 stocks ,

To subscribe, you need to buy 100 successful stocks in exchange for shares.
For redemption, you can take ETF shares and exchange them for constituent stocks.

Both ETF and LOF can be traded on the market, and both can be purchased and redeemed off the market. What is the main difference?

Subscription and redemption of ETF use stocks, so it is carried out on the market, and a securities account is required, while LOF purchase and redemption use price limits, which can be either on the market or off the market, and only need a fund account outside the market.
ETFs do not need to prepare cash for redemption. It is the same whether it is on-site trading or off-site subscription and redemption. Redemption off-site is equivalent to dealing with fund managers. And LOF needs to prepare funds to deal with redemption.
ETFs do not have a cash conversion step, so tracking errors are smaller than LOFs.
The subscription and redemption thresholds of ETFs are much higher, because it is difficult for ordinary people to manually purchase constituent stocks in proportion, and it is generally implemented by institutional procedures, and there are capital requirements. And LOF ordinary people can subscribe for redemption.
ETFs generally have lower management fees than LOFs.

#Money Market Fund

Monetary Fund, the English name Money Market Fund, mmf for short, is an open-end fund that gathers idle funds from the society, is operated by a fund manager, and the fund custodian keeps the funds. It is specially invested in money market instruments with low risk.

Monetary Fund Features:

The purchase capital threshold is extremely low, and even 1 yuan can be purchased.
The risk is extremely low, and it can even be said to be the lowest risk fund. Because monetary funds invest in short-term treasury bonds, bank bills, commercial bills endorsed by banks, bank acceptance bills, bank term and large negotiable certificates of deposit, etc., the term is usually limited to one year.
The handling fee is low, and many monetary funds have no subscription fee and redemption fee.
The redemption of money funds is very fast, about a few days.

Monetary fund products mainly have two indicators:

The income per 10,000 shares, as the name suggests, is the amount of income generated by the currency fund per 10,000 shares in the past day.
The seven-day annualized rate of return is referred to as “seven-day annualized rate” and is presented in percentage. For example, the “seven-day annualized rate” is 2.273%, which means that if the average daily rate of return of the past 7 days remains unchanged for the next year, investors can have an overall return of 2.273% after holding for one year. It should be noted that the “seven-day annualization” represents the speed of making money in the past 7 days. Future earnings may decrease, remain unchanged, or increase.

Although money funds have a low threshold, many people hold a small amount of spare money and do not want to buy high-risk stocks or funds, so they will buy money funds. Therefore, the number of money funds is small and the overall scale is also large. Monetary funds are sold on the websites and mobile applications of most fund companies and securities firms, and many wealth management products are also linked to monetary funds, such as China’s Yu’e Bao.

#FOF Fund

Finally, let’s talk about FOF, which is the fund of funds, Fund of Funds, or FOF for short. The difference with ordinary funds is that ordinary funds invest in securities such as stocks and bonds, while FOF invests in other funds. It invests by screening funds of different sectors and themes to further diversify investment and enhance its ability to resist risks.

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