The average yield of bond funds in 2021 is 4.97%, which may surprise many basic people (source: Galaxy Securities, as of December 31, 2021).
Many investors do not understand the investment targets behind bond funds, and usually pay more attention to partial stock funds and pay less attention to debt bases. In fact, debt-based and partial equity funds are not the opposite of "either-or", and the "incense" of bond funds is often highlighted in the volatile market.
The bond base trend is relatively stable, and the volatility is not high
Many people's first impression of bond funds is relatively stable, and this is true from the perspective of historical returns, between 2007 and 2021, bond fund indexes have achieved positive returns in 13 years, of which 8 have annual yields of more than 5% and 15 years of annualized yields of 5.81% (source wind).
(Source: wind, statistics: 2007 to 2021)
Bond funds are moving steadily, which is inseparable from the nature of investment assets. Bond funds will invest no less than 80% of the funds in bond assets, and the income of the bond comes from the coupon interest and the bond price, the former is the ratio of interest paid to the coupon amount, the latter bond price and the market interest rate are inverse relationship, when the supply of funds tightens, the market interest rate rises, the price of the bond will fall, and conversely, when the supply of funds is relaxed, the market interest rate falls, the price of the bond will rise.
Although the price of the bond fluctuates due to the impact of the market interest rate, because the coupon income is clearly marked when the bond is purchased, the annual interest income is relatively fixed, and the bond yield is relatively stable in the long run. Compared with ups and downs of equity funds, the yield curve of bond funds fluctuates lower, with an annualized volatility of 3.09% in the bond fund index over the past 15 years, which is nearly 19 percentage points lower than the annualized volatility of the partial stock hybrid fund index in the same period (source wind).
Partial stocks + debt-based combination, the income is more stable
Judging from the performance of the CSI 300 and the CSI All Bond Index in the complete natural year in the past 15 years, the two types of assets have shown a "seesaw" effect, and the 9-year CSI 300 Index (representing equity assets) and the CSI All Bond Index (representing bond assets) have risen and fallen in the opposite way. The correlation between bonds bulls and bears and the stock market bulls and bears is weak, and during the stock market rally, although the yield of bond assets is lower than that of stock assets, positive returns can also be obtained, and in years of stock market volatility, the advantages of bond assets are more prominent.
(Source: wind, from 2007 to 2021, CSI 300 represents equity assets, and CSI full debt represents bond assets)
Put on the fund, although the income of the bond fund is relatively low, but the volatility is relatively low, the return of the stock fund is relatively high, but the volatility is also relatively high, if in the construction of the portfolio, in addition to the allocation of higher risk, return on the stock fund and other assets, the appropriate combination of part of the proportion of bond funds, in the long run, the return of the entire portfolio will generally be higher than the simple allocation of bond funds, the volatility will generally be lower than the simple allocation of stock funds.
Here we do a data calculation, if according to the combination of one: 40% stock + 60% bond, combination two: 30% stock + 70% bond combination, the cumulative return of the two groups of combinations in the past 15 years is higher than the full bond fund, and the overall volatility is lower than that of the full stock fund.
(Source: wind, 2007-2021, with common equity fund indices representing equity assets and bond fund indices representing bond assets, Note 1)
For the current market, if investors allocate a higher proportion of equity funds, they may wish to consider allocating some bond funds to smooth the risk of account volatility and improve the account holding experience. However, if you want to allocate bond funds, Xiaoou suggests two points of attention.
If you want to allocate the debt base, there are 2 points to pay attention to!
1. The performance of the debt base is largely differentiated, and attention is paid to selection according to needs
Last year, although the average yield of bond funds was nearly 5%, the performance also showed great differentiation. In 2021, the highest yield of bond funds reached 48.63%, the lowest yield was -24.92%, and the difference between the first and last performance was 73.55%, and in the long run, the phenomenon of performance differentiation is not a single year.
(Source: Wind, 2016-2021, Wind Open-ended Fund Classification - Bond Funds)
Therefore, when selecting bond funds, we must consider the continuity of their performance, such as selecting bond funds whose annual performance is above the average return of similar funds, which can obtain positive returns in each full fiscal year, and the annualized volatility and maximum drawdown of bond funds, especially in the bond fluctuation stage, it is preferable to select products with small drawdowns.
2. It is not recommended to buy only the debt base for full positions
When the stock market fluctuates sharply, many people consider using the debt base to "hedge", although the long-term volatility of the debt base is low, but investors buying bond funds should not ignore personal investment needs, risk tolerance blindly "full position", everyone's investment situation and risk preferences are different, there are long and medium lengths in the investment period, there are high and low risk characteristics, and it is necessary to find the appropriate proportion range according to their own asset allocation.
Xiaoou gives you a reference, if investors have a high risk appetite and are well aware of the expected risks of equity funds, they can appropriately add a small proportion of debt base to the portfolio to reduce the risk of portfolio volatility; if the investor's risk appetite is low, then the portfolio is suitable for increasing the proportion of debt-based investment and enhancing their sense of base holding experience.
As the saying goes, "bond assets are the cornerstone of asset allocation", bond assets and stock assets are not antagonistic relationships, you can use the low correlation between the two to adjust the allocation of bond funds and equity funds at different times to improve the risk ratio of portfolio returns.
Note 1: The calculations here are based on certain assumptions and exponential data, and there are limitations. Where an investor invests in a different fund or does not continue to invest, the actual return may not be consistent with the conclusions drawn from the above calculations. The above is for reference only, investors buy fund products there is a risk of principal loss.
Funds are risky and investments need to be done with caution. The above materials are not intended as any legal documents. The fund manager undertakes to manage and use the assets of the fund in good faith, diligence and responsibility, but does not guarantee that the fund will be profitable, nor does it guarantee a minimum return. Investors should carefully read the relevant fund contracts, prospectuses and product information summaries and other letter approval documents, understand the risk and return characteristics of the fund, and judge whether the fund is compatible with the risk tolerance of investors according to their own investment objectives, investment period, investment experience, asset status, etc. Mainland funds have been in operation for a short period of time and do not reflect all stages of stock market development. Past performance wells of the Fund do not indicate its future performance, and other fund wells managed by the Manager do not constitute a guarantee of the Performance of the Fund.