For many people, compared with stocks, insurance, and bank wealth management, bonds are all slightly unfamiliar investment targets.
1. What exactly is a bond?
The earliest form of bonds was public bonds generated during the era of slavery.
Greece and Roman In the 4th century BC, the state began to borrow from merchants, loan sharks and temples. After entering feudal society, public debts were further developed, and many feudal lords, emperors and republics issued public debts whenever they encountered financial difficulties, especially when wars occurred. In the late 12th century, in Florence, the most economically developed Italian city at that time, the government raised government bonds from financial operators. Later, cities such as Genoa and Venice followed suit.
Although it is as compulsory as taxes, unlike taxes, everyone is promised to receive a certain percentage of interest until the principal is paid off.
Bonds are commonly referred to as IOU. It stipulates bond issuers, face interest rates, interest payment frequency and maturity, etc.
Depending on the borrower's subject, such as state, local government, financial institutions, and physical enterprises, bonds are divided into treasury bonds, local government bonds, financial bonds, corporate bonds, etc. As a bond investor, the borrower provides funds, and the interest obtained is that the borrower pays fixed interest every year and returns the principal when the bond matures.
For example, if you buy a treasury bond with a face value of 100 yuan, an interest rate of 5%, an interest payment frequency of 1 year, and a term of 5 years, you will receive 5 yuan, 5 yuan, 5 yuan, 5 yuan and 105 yuan in the first to fifth years of buying the bond.
2. What do we often refer to as fixed income?
From the above bond repayment process, under the premise that the bond does not default, the repayment method, time and amount of the bond are determined, and the returns obtained by investors when holding the bonds to maturity are also determined. Due to this fixed nature, bond investment is also a very important type of fixed income investment.
Because the income is determined, when banks, securities companies and insurance make asset allocation, for funds with a large amount of funds for the purpose of preservation of value, there will be a certain proportion of funds allocated to bonds to obtain a certain return.
3. What other sources of income of bonds?
bond returns are mainly two major sources: one is the fixed interest income mentioned above; the other is the capital gains . Investors can transfer bonds. Bonds are traded at market prices, and there is a difference between the buy price and the sell price, which is the source of capital gains.
4. What are the risk characteristics of bonds?
From an investment perspective, the capital of a company is generally divided into two categories: stocks and bonds. The surplus value or distributable capital created by the company every year is distributed to bond investors and stock investors through bonds and stocks.
One thing to note is that the company's profits will be distributed to bond investors first, that is, bond investors' priority for obtaining returns is higher than stock investors. In the event of a company going bankrupt, the company's assets will be liquidated, and in the liquidation and repayment process, bond investors will also give priority to obtaining the company's remaining assets. As long as the company does not go bankrupt, the returns of bond investors are relatively fixed. From this point of view, bonds have more stable returns and lower risks than stocks.
In my country, the total scale of the bond market is much larger than the total market value of the Shanghai and Shenzhen stock markets, but why are few of us involved in bond investment? This is mainly the reason for trading venues.
5. What are the trading venues for bonds?
Bond market includes interbank market, exchange market and bank counter market.
Interbank market is the most important bond trading market, but it is only for institutions. The total amount of bond market transactions in the past year has reached more than 98%.
Ordinary investors can participate through interbank counter transactions, but because the amount of a single bond transaction is large, it is difficult for retail investors to find counterpartys, the transaction efficiency is extremely low, and bond investment requires quite high professionalism, making it difficult to participate.
So, for ordinary investors, buying bond funds is the best way to participate in bond investment - there are fewer transaction restrictions, a wider investment range, and you can also add leverage .
6. Bond fund?
More than 80% of the fund assets are invested in bonds as bond funds. Bond funds are mainly divided into pure bond funds, first-level bond funds, , and secondary bond funds.
Pure Bond Fund - Funds that invest in bonds, do not invest in the stock market at all. Due to different investment periods, it is divided into medium- and long-term pure bonds and short-term pure bonds.
First-level bond fund - mainly investing in bonds and does not participate in secondary market stock trading, but can invest in convertible bonds and hold stocks formed by convertible bonds to convertible bonds and , with a stock position no more than 20%.
Secondary bond fund - mainly investing in bonds, with a maximum of 20% of the ratio that can be invested in stocks, participate in secondary market stock trading, or participate in investment in new stocks in primary markets.
Overall, bond fund products are relatively low-risk among fund varieties. In terms of risk level, stock funds; mixed funds; secondary bond funds; primary bond funds; pure bond funds; money funds.
risk is proportional to return. The higher the risk, the higher the return, but in difficult times, the more volatility. In most cases, the trend of stocks and bonds is negatively correlated. This year, the stock market has been cold, but bonds have gained a lot.
Data source: Wind, data statistics range 2018.1.1-2018.12.17
7. What are the sources of returns of bond funds?
In addition to the interest income and capital gains of bonds, bond funds also have leverage income and stock returns.
Leveraged Returns - Usually, in order to gain higher returns, the fund manager of a bond fund will release leverage. Invest in bonds by raising funds, and then mortgage the bonds in hand to financial institutions to obtain more funds, and new funds can continue to invest in bonds. For example, the original funds raised were 100 million yuan, and financial institutions raised 30 million yuan, with a total of 130 million yuan in bond trading. The profits obtained by this 30 million yuan are the leveraged income of the fund. The fund's leverage ratio is 130%.
Stock income - Primary bond funds can hold stocks formed by convertible bond conversion, and secondary bond funds can be invested in stocks, and stocks will increase will bring some profit contribution.
8. What risks are bond funds facing?
Bond funds have to bear the risks of the bond itself:
default risk: The bond issuer cannot pay the bond interest or repay the principal on time, causing losses to bond investors.
Liquidity risk: Investors cannot sell bonds at reasonable prices in the short term, which means they may not be able to buy or sell. Some bonds on the exchange have very few trading volumes per day. Of course, if you are ready to hold it to expire, liquidity risks are not necessary.
Price fluctuation risk: Bond prices fluctuate in real time due to factors such as supply and demand. Bond price and bond yield are inversely related. For example, if I lend you 100 yuan and agree to give me 105 yuan in a year, my yield in the next year will be 5%. But I was anxious to use the money and immediately sold the 100 yuan bond to another person, the price was 101 yuan. At this time, the yield of this bond fell and became 5/101=4.95%.
However, for investors who are preparing to hold maturity, price fluctuations are irrelevant because the interest and principal he will receive in the future are still certain, provided that the bond will not default. Therefore, the biggest risk of bonds is default risk.
Primary and secondary bonds can be invested in the stock market, and they also have to bear the risk of stock market fluctuations.
9. When is the best time to buy bond funds?
mentioned earlier that bond funds face some risks and cannot guarantee that they will not lose money, but the risks of bond funds are relatively low. Judging from the long-term trend, they are basically a relatively stable rise and smaller volatility. Wind historical data shows that the two-year average yield of bond funds is 6.21% and the three-year average yield is 5.35%.
Backtesting the data for the past 10 years, it was found that when the stock market was down (calculated below 2700 points), bond funds and money funds both showed a "stable return" side. Therefore, patience in investing in bond funds is more important than timing.
Trend of each bond index for the ten-year period
Data source: Wind, data statistics range 2008.12.18-2018.12.1
But if we have a deeper understanding of the logic of rising and falling in the bond market, it will help us grasp the opportunity to invest in bond funds from the general direction. The more or less money in the financial system will directly affect the rise and fall of the bond market. If the more money, the more money will increase, and if the less money, the bond market will fall. There are two factors that lead to how much money is in the financial system:
, the central bank's monetary policy. If the central bank releases liquidity, the bond market will theoretically rise when interest rates are cut; if liquidity is tightened, the bond market will theoretically fall when interest rates are raised. The most important factors affecting the central bank's monetary policy are the price growth rate (CPI) and the economic growth rate (GDP). If the CPI breaks through the 3% warning line, the central bank may tighten liquidity through interest rate hikes in the future. The second is GDP. If the CPI is not high and GDP growth is relatively low, the central bank may release liquidity by stimulating the economy, which is a good time to invest in bonds.
The second is a regulatory policy that affects the debt buying behavior of financial institutions. Financial institutions are the largest players in the bond market, and more than 60% of high-credit bonds are bought by commercial banks. Therefore, financial institutions are in a state of more or less money, which will directly affect the trend of the bond market. Policy-based impacts are often short-term and often create good investment opportunities.
10. Is the current time in line with the logic of the rise in the bond market?
The central bank announced the creation of TMLF to support the real economy and reduce the cost of real financing. The tone of loose domestic monetary policy is clear, and the central bank maintains a reasonable level of liquidity, which is a "peace of mind" for the capital side, and the bond market is still continuing.
11. How to choose a bond fund?
1. The company's strength is very important.
1. The top scale
2. The fixed income team has rich experience in management
3. Good reputation
2. Choosing a fund is the person who chooses management
1. Excellent bond fund manager
2. The past managed funds have stable performance
3. The industry's major awards are earned
0. This article comes from China Merchants Fund
. For more exciting information, please come to the financial industry website (www.jrj.com.cn)
