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Zhi Finance » How to evaluate a fund correctly?

How to evaluate a fund correctly?

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“We should not only focus on the short-term performance of fund products, but also experience a complete bull bear cycle.”

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Before investing in the fund, evaluating it is a lesson that investors cannot avoid, just as Chairman Mao said, “Do not fight unprepared.”.

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So how to evaluate fund products more scientifically? That is, we should not judge from only one angle, but consider comprehensively; We should not only focus on the short-term performance of fund products, but also experience a complete bull bear cycle.

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From the perspective of fund performance, we can evaluate the strength, past performance and stability of the investment research team of the fund company.

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Investors who have bought the fund know that the fund with good performance is growing due to the continuous purchase scale of investors, and the management fee of the fund is drawn according to a certain proportion of the size. The size of the fund determines the capital advantage, and thus the strength of the fund investment research team. Therefore, to choose a fund is to choose the management scale from a certain perspective.

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The convergence of the net value performance of the same type of funds is also an important indicator of the strength of the investment research team. Excellent fund companies have a complete investment research system, and more emphasis on collective wisdom. Fund managers can only make limited independent decisions within the scope specified in advance, avoiding the possibility of individual mistakes to the greatest extent, thus ensuring the consistency of product performance.

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Of course, the performance of a fund is also an important factor for investors to consider. But when we examine the performance of a fund, we should not only focus on the short-term return of the fund, but also put it in a complete bull bear process to measure whether the product has the ability to cross the cycle.

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At the same time, it is not enough to focus on absolute returns. If the annual return of a fund is 20%, we need a relatively objective standard to evaluate whether the return is high or low. This is the so-called performance evaluation benchmark. Performance evaluation benchmark is usually divided into market index and average performance of the same type of fund. The CSI 300 index and CSI 500 index we often refer to are market indexes. The extent to which the fund you buy outperforms the market index is a common performance benchmark. The more you outperform the tracked market index, the better the performance of the fund will be. In addition, the performance of the same type of fund is also a benchmark for evaluation. If you buy stock funds, then compared with other stock funds, of course, the more you surpass your peers, the better.

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A good fund has a certain stability on the basis of a good yield. The stability of the fund mentioned here includes both the stability of fund performance and the stability of fund managers.

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The stability of fund performance is often referred to as the volatility of fund performance. Of course, the stability here is a relative stability rather than an absolute stability. After all, any investment product will have fluctuation risks, and even monetary funds are unavoidable. On the other hand, fund stability refers to whether the tenure of fund managers is stable. For a fund, the fund manager directly affects the investment strategy of the fund and the interests of investors. If the fund manager changes frequently, it is bound to affect the continuity of the fund’s investment style. Therefore, stability is very important for both fund performance and fund managers.

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For returns and stability, it can also be further determined through a series of indicators to measure risk returns. Generally, we take the volatility (i.e. variance) of the historical rate of return series as a measure of risk. The higher the value, the greater the volatility, the lower the stability, and the higher the investment risk. Sharp ratio is a very classic indicator to describe risk adjusted returns. The core idea is to choose funds with similar returns to take the smaller the risk, the better. Similarly, the Sotino ratio, which uses the downward volatility and the maximum pullback as the indicators of risk assessment, only considers the downward volatility, not the upward volatility. When investing, investors can compare the risk adjusted returns of different funds under the same category as a reference indicator, and can also choose the type of fund to invest according to their own risk preference.

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In addition, reference to the rating of a third party is also an important means of evaluation. The third-party rating agencies of the Fund, including Morningstar, Haitong, Galaxy, China Merchants and Jian Financial Information, have different evaluation criteria. Of course, the evaluation criteria mainly focus on risk evaluation indicators and income evaluation indicators, which can help us quickly screen qualified fund products and improve investment efficiency. Of course, everyone has their own investment habits, and rating agencies may also have their own favorites. If comprehensive evaluation is carried out, it may be more reliable.

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In addition to directly checking the performance and referring to the opinions of professional institutions, other information of the Fund can also be included in the evaluation, such as whether the position structure of the Fund, the investment object of the Fund, and the investment philosophy of the Fund meet your expectations for market development. Or you have your own criteria for judging qualified fund managers, which can be used as factors to judge funds.

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