A Question "Easy" Answer: Buy Fund, Can You Make Money Every Year?

"Yi" answer: make money ≠ make money every year

"More than every year" is an old Spring Festival blessing. People naturally hope to make money every year when they invest in financial management.

In the A-share market, actively managed funds bring good long-term returns to investors.

For example, in the 10 years from 2011 to 2020, the annualized yield of the CSI active equity fund index (which can be regarded as the weighted average performance of actively managed equity funds) is 10%, and the cumulative yield is 165%.

However, holding for 10 years can earn 1.65 times of the principal, which does not mean that every year is profitable.

This is because annualized yield is an average concept. As shown in the figure, in 2011, 2016 and 2018, if we buy at the beginning of the year and sell at the end of the year, we will not only lose money, but also lose more than 10%.

Therefore, there is a risk of short-term losses in fund investment. Even if some stock funds achieve more than 10 times of return, they do not make money every year. Investors can smooth the short-term periodic fluctuations of the market through long-term holding, so as to obtain good returns.

(data source of this issue: e-fonda internet teaching base, wind, December 31, 2010 to December 31, 2020; Annual yield = (closing price of the last trading day - closing price of the first trading day) / closing price of the first trading day; Annualized rate of return is calculated on calendar days, with annual = 365 days.)

Knowledge patch:

What is annualized rate of return?

Annualized rate of return is different from annual rate of return. Annual rate of return = annual income / annual investment, which is the real rate of return.

The annualized rate of return is to convert the investment income over a period of time (which can be longer than one year or shorter than one year) into the return of holding for one year. Annualized rate of return assumes that the same rate of return is obtained in each year during the investment period. It is a theoretical rate of return, which is mainly used to compare the investment return levels of products with different investment periods.

For example, the investment of 1000 yuan on January 1, 2020, and the investment has changed to 1350 yuan on March 31, 2021 (after 455 calendar days in total), the annualized rate of return is 27%.

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