Fund Investment: A New Concept in Financial Management

Author: China Securities Association Investment Fund Industry Committee
Publisher:
Publish Date: 2003-08-01
Features: How should investors typically approach general financial products and advanced financial products? Financial common sense tells us that general financial products can be divided into risk products and risk-free or low-risk products. This concept is widely recognized, so people pursue the absolute return of risk-free products while seeking the relative return of risk products, acknowledging potential losses if risks occur. For advanced financial products, the same distinction exists between risk, risk-free, and low-risk categories, depending on the combination of general financial products used. In other words, it depends on the main components of the fund's assets. Most funds are primarily composed of stocks, making them risk products, so investors in them can only expect relative returns. In reality, many investors are confused about this concept, especially when the stock market experiences significant declines. Funds heavily invested in stocks naturally perform poorly, leading to complaints that fund managers cannot provide absolute returns. In fact, an excellent fund manager managing a portfolio of risky financial products does not lie in delivering absolute returns to investors but in whether the value changes of the assets they manage outperform market indices. Therefore, investors must accurately understand the intrinsic meaning of the products before purchasing funds.