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What are the risks in fund management?

Investing is risky, but the joy of returns makes many people forget the existence of risk. What are the risks of fund management ?

  1. The risk of unknown subscription and redemption prices for open-end funds .

The risk of unknown subscription and redemption prices for open- end funds refers to the change in the net asset value of fund shares from the previous trading day to the opening day when investors subscribe and redeem fund shares on the same day , which investors cannot predict. There is no way to know the transaction price at the time of return.

  1. Investment risks of open-end funds

The investment risk of open-end funds refers to the risk of stock investment and bond investment. Among them, the stock investment risk mainly depends on the listed company’s operating risk, securities market risk and economic cycle fluctuation risk. Bond investment risk mainly refers to the risk that interest rate changes will affect the return of bond investment and the credit risk of bond investment. Funds have different investment objectives and often have different investment risks. Income funds have the lowest investment risk, growth funds have the highest risk, and balanced funds are in the middle. Investors can choose funds that suit their financial situation and investment objectives according to their risk tolerance.

  1. Risk of Force Majeure

Force majeure risk refers to the risk faced by fund investors in the event of force majeure events such as wars and natural disasters.

  1. Market risk

Market risk mainly includes policy risk, economic cycle risk, interest rate risk, listed company operation risk, purchasing power risk, etc.

  1. Policy risks

Policy risk refers to the risk of market price fluctuations caused by changes in national macro policies (such as monetary policy, fiscal policy, industrial policy, regional development policy, etc.).

  1. Business cycle risk

Business cycle risk means that with the cyclical changes in economic operation, the profitability of various industries and listed companies will also periodically change, thus affecting the trend of the secondary market of individual stocks and even the entire industry sector.

  1. Interest rate risk

Interest rate risk refers to fluctuations in market interest rates that will lead to changes in market prices and yields of securities. Interest rates directly affect the price and yield of government bonds, and affect the financing costs and profits of enterprises. When the fund invests in treasury bonds and stocks, its level of return is affected by changes in interest rates.

  1. Operational risks of listed companies

The operation risk of a listed company means that the operation of a listed company is affected by many factors such as management ability, financial status, market prospects, etc., industry competition, personnel quality, etc., will lead to changes in corporate profits. If the listed companies invested by the fund are not operating well, their stock prices may fall, or the profits available for distribution may decrease, resulting in a decrease in the fund’s investment returns. While a fund can diversify this unsystematic risk through investment diversification, it cannot completely avoid it.

  1. Purchasing Power Risk

Purchasing power risk means that the fund’s profits will be distributed primarily in cash, which may have reduced purchasing power due to the effects of inflation, reducing the fund’s real income.