"Investor Protection-Rules, Risk Knowledge" 34.

-- Fund investment risk prevention skills.

1. What common irrational behaviors can lead to fund investment failure?

In the course of investment practices, the following common irrational investment behaviors can lead to the failure of the Fund's investments:

(1) Unconsciously chasing up and down

Historical experience tells us that investors are easy to chase the rise and fall in the process of equity product investment. Seeing that other people have made money by buying funds, they also want to invest in stock funds, and they often chase the market to buy. The more the market rises, The higher the position increases; the same is true when the market falls. The more low the market, the more panic selling. The result of this approach is to continue to chase the rise and fall in the investment process, resulting in more and more losses and less and less principal.

(2) Make decisions based solely on past performance.

It is true that the past historical performance of the fund, especially the products that are actively managed, can better reflect the management ability of the fund manager, and is also an important basis for investors in the process of making investment decisions. However, past performance does not represent a commitment to future investment capabilities, especially short-term performance, and can often be misleading in decision-making. This is because markets and industries are usually characterized by cyclical fluctuations. The past period of time is good, and there may be risks of adjustment in the future; the past period of time is not good, and there is also the possibility of reversal in the future.

(3) Lack of risk awareness

Judging from the history of the past 20 years, funds, as a popular financial management tool, as long as they are used properly, can bring good investment returns to investors in the medium and long term. Compared with direct investment in stocks, funds as a portfolio investment tool have relatively low risk; however, public funds, especially partial stock funds, also have certain risks. The market is volatile, the fund is risky, we can not only see the potential benefits of investment, but also keep in mind: the benefits and risks coexist!

(4) Lack of long-held awareness

The point of investment is indeed important, but more important than the point of entry is the long-term holding. It is very dangerous to use short-term trading thinking to invest in funds. This is not only because short-term timing itself is very difficult, but also because the fund itself has a higher redemption cost. Frequent trading not only has a higher probability of making mistakes, but also produces Very high transaction costs, the results are often counterproductive.

2. What should I do when the net value of the fund fluctuates?

If the stock market goes up or down, the net value of the fund is bound to fluctuate. When the net value of the fund fluctuates, investors will make many different choices, some choose to continue to hold, some choose to sell and wait and see. From a value investment perspective, it is unwise to abandon an investment target already held at a stage where the price is well below intrinsic value.

The first reason is that long-term holding may test the mentality of investors, but holding funds with excellent long-term performance will have a higher investment win rate. If the selected fund product itself has no problems in operation management and investment direction, although short-term fluctuations may fall, the future prospects are likely to be bright. On the contrary, if investors leave the market based on their own predictions of market trends and think there is no opportunity in the near future, they may miss the upside phase if they make a mistake. It may be a safer and more effective way to wait for the best stage of the market with long-term funds.

The second reason is that timing is a very low winning thing, and in the long run, it is more valuable to stick to disciplined investing. Investors often see various market views, analysis articles, and then make investment decisions based on them. These markets have a variety of perspectives and different conclusions, and are timing trades entirely on this basis, with a higher probability of error. Capital markets are inherently complex and unpredictable. To get good long-term returns in the market, you have to overcome human weaknesses and stay away from the timing dilemma through disciplined long-term investing.

The third reason is that excellent active fund products have excess returns over the long term. According to the Fund Industry Association, from 2001 to 2016, the average annualized return of all-market partial-equity funds was 16.52 per cent, compared with 7.75 per cent for the Shanghai Composite Index over the same period, with an average annual excess return of nearly 9 per cent and even more for outstanding fund products. For excellent products, the benefits of long-term holding are very obvious. It can not only help us obtain long-term higher returns, but also an effective strategy for us to avoid investment losses caused by short-term market fluctuations.

3. What investment methods may help reduce the fund's investment risk?

(1) Adhere to portfolio investment

The so-called portfolio investment, in layman's terms, is "don't put all your eggs in one basket", which is an effective way to reduce the risk of fund investment. Modern financial theory has proved that portfolio investment can effectively reduce the non-systemic risk of the securities market. However, it should be pointed out that portfolio investment is not a simple repeated investment. If investors repeatedly purchase multiple products without screening, it will not play a role in reducing risk. A good fund portfolio is not the more funds the better, but to enhance the degree of differentiation of the fund products, and the number should be appropriate, in order to achieve the purpose of risk diversification.

(2) Fund fixed investment

Whether it is an active equity fund or a passive index fund investment, fund fixed investment is more suitable for investors who lack investment experience or lack sufficient energy to analyze and track the market, which means that they can avoid the risk of market volatility to a certain extent through disciplined batch purchases. Fund fixed investment can not help us "copy the bottom", but can help us to share the purchase cost.

(3) to have reverse operation thinking

Buffett has a famous investment saying: others greedy I fear, others fear I greedy. This sentence says that investment should have the thinking of operating against market sentiment. Most people conform to market sentiment in the actual operation process, and this way of thinking is essentially determined by human nature. The market is always in constant volatility, in addition to portfolio investment and fund fixed investment, in the market sentiment is low, the appropriate increase in the amount of fixed investment deduction or the appropriate increase in equity fund positions; in the market sentiment is high, the appropriate reduction of equity fund positions, but also an effective way to avoid fund investment risks.