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Bond funds

Investing in bond funds

Bond funds are also considered to be safe, but not in the same way as money funds, because under specific circumstances they can be loss-making - if bond prices fall.

They invest their assets mainly in bonds and treasury bills, but the consequence of this is that the value of participation units depends not only on the interest rate on the bonds but also on the trend in the treasury securities market.

This is a proposal for people who are determined to avoid risk. The rate of return under the current conditions should be 4-6%. It is best to buy them when interest rates in the country are high, but they are likely to fall. Risks are at risk when the feet are low and can go up (there are now).

Foreign bond funds

You can include funds of foreign bonds in your fund investment strategy.  There are two additional risks for this group of funds Foreign bond funds are more volatile valuations of bonds, which is accompanied by currency risk.

Foreign bond funds for foreign currency hedging are sometimes available in investment products. Incorrect interpretation of results and evaluations of such funds may result in losses exceeding up to 10% of the value of accumulated capital.

The use of additional knowledge about these funds allows to significantly reduce the investment risk, at the same time increasing the potential profits to the level of profits even over 5% higher than the interest rate on bank deposits.

Therefore, using this group of funds (especially when funds with currency hedging are available) we recommend using dedicated training courses on bond funds, as well as on foreign bond funds.

Investing in investment funds

Investing on the fund market is governed by a simple rule.  Every additional knowledge allows you to earn more with less risk.  The same applies to the market for low-risk funds.

Knowledge of the rules of operation of these funds, influence of inflation on the results of funds, principles of searching for investment opportunities are necessary to increase the profitability of such investments.

Not every investment product has many low risk funds in the domestic market. Therefore, if your investment product:

  • there are no low risk funds in the domestic market - this strategy cannot be applied;
  • has only one low risk fund - there is not much choice . In order to apply this strategy, we simply choose this fund and transfer the money collected to it.  In the case of passive investment resulting from the inability to make changes between funds, the chances of making a profit better than bank deposits are very small here;
  • has only two or three national low risk funds - one or two funds are selected for the portfolio.

Additional rules:

Three low risk funds in the portfolio represent the maximum amount.  More funds means more diversification - and this leads to a lower output (through the average performance of individual funds).

With basic additional knowledge, you can choose between 1 or 2 funds with the best prospects for the future (that may be funds of the same kind - e. g. two bond funds).

Operating as a model (not interested in the fund market) it is worth to have 2-3 funds in the wallet, one of different categories (monetary, cash, bonds).  This approach secures against additional risk from bond funds.

We try to avoid guaranteed funds - their results are usually much worse than those of bank deposits.

Low risk funds of foreign markets - we add to the portfolio only when we have knowledge about the rules of their operation.


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