3 Questions You Must Understand Before Put More Money With Fixed Income

Question 1: What are the options for setting bids?

What's worth buying for a fixed investment?

In order to answer this question, we must first understand what the magic of fixed deposits is.

In essence, fixed deposit has the property of "value investment", buying a fixed amount, buying less when the price is high and more when the price is low, and obtaining lower cost of holding a position in the long run.

How to make the most of this characteristic of fixed deposit?

The greater the volatility, the more effective the fixed investment will be, given consistent long-term returns.

How do you make the most of this characteristic of a fixed-rate investment?

The greater the volatility, the more effective the fixed investment will be, given consistent long-term returns.

Question 2: ETF or open-ended?

If we want to invest in GEM-related index funds, then the straightforward question is whether to buy ETFs or open-end funds (such as the ETF's counterpart, the feeder fund).

My answer is simple: ETFs are suitable for short term speculation, while fixed income funds should be open-ended.

If you want to use ETFs for fixed investments, there are a few practical obstacles.

First, the threshold is high.

Since the minimum trading unit of ETF is 100 shares, the minimum amount you can invest in an ETF is at least 200 yuan for a single investment.

This restricts the minimum amount of your single fixed investment, compared with open-ended funds, which often start at 10 yuan or even 1 yuan, which is obviously a better choice for those investors who like to invest small amounts every day.

Second, it is difficult to play the fixed investment effect.

The key is to buy less when the point is high and more when the point is low.

But this operational need is limited by the minimum trading unit of the ETF.

For example, if you want to invest $300 each time and a fund rises from $2.1 to $2.5, this is the minimum trading unit. In the process, because of the minimum trading unit, you can only buy 100 shares, so it becomes a fixed amount.

In contrast, the minimum purchase share of an open-end fund can even be 0.01 shares, which can fully utilize the fixed investment amount.

Because ETFs have this disadvantage in fixed investment, fund companies often launch open-end ETF-linked funds for ETFs.

Question 3: Which Class A and C should be bought?

At present, most mainstream index funds offer two types of products, A and C. For many investors, they are at a loss as to which one to choose.

For this kind of questions, you may want to remember this phrase: Swing choose Class C, fixed investment choose Class A.

What is the difference between Class A and Class C funds?

Class A charges a one-time subscription fee, while Class C does not charge a subscription fee but charges an annual sales service fee.

The rates for the two funds, for example, are as follows.

Fund investment is generally a long-term financial event. Let's use a 2 year holding period to calculate the cost.

Cost of holding Class A for two years: 0.01% subscription fee + 0.05% redemption fee = 0.06%

Cost of holding Class C for two years: 0.25% sales service fee / year × 2 = 0.5%

Yes, nearly 10 times the difference, and this gap will rise with the increase in the holding period, so fixed investment must be A class is better.

Of course, if you just want to do volatility, especially the holding period in less than 3 months, C class is better varieties.