We can start from the following five aspects

1. What is the past performance of the fund?

To truly understand the performance of the fund, we must not only look at the rate of return, but also have a corresponding background reference-compare the rate of return of the fund with a suitable benchmark. The so-called appropriate benchmark refers to the relevant index and other funds that invest in the same type of securities. How to compare the performance, here we recommend using Tiantian Fund or Morningstar.

many people think that if there are two funds with annual returns of 22% and 2% respectively in the past two years, then the former must be more outstanding. Sometimes it is, but it is not an eternal law. Funds with a return of 22% may lag behind their performance benchmarks or similar funds by 4 to 5 percentage points; However, a fund with a return of only 2% may surpass similar funds or performance benchmarks by 6 percentage points. Therefore, the latter is a fund with better quality.

2. How risky was the fund in the past?

Investment is risky, and some funds are risky. Generally speaking, the higher the return on investment, the higher the risk and the greater the possibility of loss.

Therefore, considering the rate of return of the fund, we must also consider the volatility of the fund. Two funds with the same rate of return may not be equally attractive, because their volatility may be different. There are many methods to measure the volatility of funds, among which standard deviation and beta coefficient are two commonly used risk calculation indicators, and three important indicators are volatility, Sharp ratio and maximum retracement. These indicators can be queried and compared through Tiantian Fund Network and Morningstar Network.

3 what scope does the fund invest in?

To have a reasonable expectation of the fund's return, we must know its investment portfolio, that is, what securities the fund invests in. For example, bond funds can't be expected to get a 1% annual return, but this is by no means whimsical for stock funds.

remember, don't guess the portfolio based on the fund name. How do fund managers use fund assets to invest? They can simply buy stocks or bonds, or both; You can choose the stocks of well-known large companies or invest in small companies that are not well known; It may focus on investing in high-priced stocks with rapid growth, or it may favor low-priced stocks with poor profit prospects. For a specific stock, the fund manager may only buy 1 shares or own 1 million shares. A careful study of the fund's investment portfolio can help us understand the fund manager's investment strategy. In Morningstar's fund rating system, the portfolio is analyzed through the positions, industry classification, Morningstar investment style box and other items.

4. Who manages the fund?

fund managers hold the investment power, which has a decisive influence on fund performance. Therefore, when choosing a fund, you must know which fund manager is giving orders and how long his tenure will be. Knowing nothing about it may lead to unexpected losses. For example, some funds have achieved impressive results in the past few years, but once the fund manager changed hands, the investment strategy changed greatly and the performance of the fund declined rapidly. Of course, there are also funds whose performance is not good, but they are thriving in the future.

5. what is the cost of purchasing the fund?

funds may not make money, but they must pay fees. Investors must pay management fees, subscription fees, redemption fees, conversion fees and other fees when they receive professional financial services. The cost of subscription is shown below.