Fund Investment Strategies: Learn Them ASAP if You Don't Know Yet

Many people are familiar with the concept of funds, but when it comes to investing in funds, how to do it effectively remains a mystery to many. It is believed that the majority of investors are only aware of two methods: lump-sum investment and fixed investment.

Lump-sum investment is relatively straightforward: buy when the market index is at a relatively low point and sell when it's at a relatively high point.

This can also be referred to as swing trading, which carries a significant risk because it is challenging to determine the exact low and high points of the market index.

Fixed investment is more carefree; as long as you set the amount of money for fixed investment and the number of periods, you just need to follow the plan each time.

In addition to these two fund investment methods, if you want to achieve higher returns, there are actually several better fund investment strategies available. They are: stock-bond balance, core-satellite, 20-80 rotation, and 20-80 balance.

Stock-Bond Balance:

The stock-bond balance is easy to understand; it involves allocating half to stock funds and half to bond funds, which means a 50:50 ratio.

And a fluctuation of 25% up or down is used as the trigger point for rebalancing. However, this fund investment strategy is more suitable for stable markets, where both can earn profits, and the risk is relatively higher during bear markets.Twenty-Eight Balance

The twenty-eight balance is relatively less risky compared to the stock-bond balance. Typically, it involves allocating 20% to stock funds (hybrid funds) and 80% to bond funds. The rebalancing criteria for this strategy is a ±5% threshold. If the stock fund allocation exceeds 25%, it needs to be reduced. If the stock fund allocation is at 15%, it should be increased. By rebalancing, the stock-bond ratio is restored to 20% and 80%, respectively. This investment strategy, due to the higher proportion of bond funds, is very stable with relatively low risk. However, its biggest drawback is that it may not outperform the market. But during poor market conditions, it can prevent significant capital losses.

Core-Satellite

This fund investment strategy is a commonly used approach. The core assets usually consist of funds with lower risk, such as money market funds, bond funds, or index funds with regular investments. The satellite funds are those with higher risk, such as stock funds and hybrid funds, used to seek higher returns.

For example, 50% of index funds as the core, plus 10% in stock funds and 40% in hybrid funds as satellites.60% of money market funds as the core + 20% hybrid funds + 20% stock funds as satellites.

The core-satellite investment strategy involves using core assets for preservation and satellite assets for achieving excess returns.

Two-eight rotation

The "two" represents about 20% of the market's large-cap weighted stocks, while the "eight" represents about 80% of the market's small and mid-cap stocks.

Typically, the CSI 300 Index, which represents large-cap stocks, is used as the "two" asset, and the CSI 500 Index, which represents small-cap stocks, is used as the "eight".

The principle of the two-eight rotation operation is to buy whichever performs the strongest between large-cap and small and mid-cap stocks; if both are weak, then invest in bond-like assets and wait for the right opportunity.

The two-eight rotation strategy is also a commonly used strategy among many investors, but it gives a feeling of chasing rises and selling on dips, suitable for investors who prefer to pursue high risk and high returns.

Of course, each of these investment strategies has its strengths, and as long as we apply them well, they can still bring us excess returns.