Make Good Use of Free Investment Tools to Build a Low-Risk, High-Return Fund Portfolio

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Funds and Fund Portfolios

Investing in the stock market is an important way to preserve and increase wealth, but individual investors have limited funds and time. Direct investment in stocks often results in nine losses and one gain. Professional people do professional things. Giving money to professional people or institutions to buy stocks, professional people pool everyone’s money together, diversify investments in securities, gold, oil, etc., and build an investment portfolio, which forms a fund.

Buying a fund alone is equivalent to giving money to someone to help you manage it. If this person’s (commonly known as an investment manager) investment style or judgment fluctuates, then investing in a fund alone may also lose money. Fortunately, Internet financial sales channels have lowered the threshold for fund purchases to less than 10 yuan. We can distribute our limited funds to buy several funds and let multiple investment managers work for you. The collection of multiple funds we purchase is called a fund portfolio (FOF).

Preparation for Building a Fund Portfolio

Investment Philosophy

Portfolio Strategy: Rational analysis to discover investment value,

Keep up with the market rhythm and hot topics, build an investment portfolio with a monthly return of more than 5% with no more than 9 equity funds, hybrid funds, and index funds, bear moderate market risks and losses, regularly check the income of constituent funds every month, eliminate funds whose monthly increase lags behind the CSI 300 Index, and transfer in carefully selected new funds.

Position adjustment frequency

Portfolio Goal

Expected Return

Backtest Performance

Investment involves risks, investing in funds involves risks, and investing in the form of fund portfolios also involves risks. How to obtain steady and reasonable returns (not getting rich overnight) while controlling risks is the correct concept of wealth in investment.

Determine Investment Goals Everyone who hopes to invest in the stock market (indirectly or directly) should have one and only one goal, which is to obtain returns far higher than the CSI 300. Otherwise, it is a waste of time, energy, and opportunity cost. For those who hope to get a return slightly higher than demand deposits, it is better to buy Yu’e Bao.

How many funds are suitable for a fund portfolio A portfolio containing 5-9 funds is most suitable. Too few will not achieve the purpose of diversifying risks, and too many will not have the energy to manage.

Fund Allocation Equal allocation for easy statistical comparison.

Fund Position Adjustment Cycle On a monthly basis, start selling and adjusting positions in the last 5 trading days of each month, and complete position adjustment in at least 3 trading days.

Number of funds in each position adjustment Maintaining portfolio stability is our goal. We must check once a month, but we may not adjust positions. Position adjustment is divided into two situations. In case of violent market fluctuations and trend reversal, all positions can be liquidated. Under normal circumstances, positions are adjusted based on the comparison between the fund and the CSI 300. If the monthly increase is lower than the CSI 300 increase, liquidation should be considered. After research and analysis, when new high-performance funds are discovered, you can also sell old funds and buy new funds.

Related Tools

Xueqiu — Position Profit and Loss For investment records.

Tianan Fund — Fund Comparison For fund screening and comparison

Danjuan Fund — Fund Portfolio For tracking the fund selection strategies of investment experts

iFund, Investment Ledger For trading

Overall Evaluation of Fund Portfolio

What are the evaluation criteria

Execution of Fund Portfolio

(1) Normal Situation

2. Extreme Situation

Fund portfolios should avoid eight misconceptions

Investors can check whether their fund portfolios have committed the following “eight taboos” from an overall perspective.

1. No clear investment goal

Investment cannot be aimless. But over time, it is easy for investors to ignore the purpose of an investment. Equity funds usually play the role of capital appreciation, while investing in bond funds or quasi-money market funds is often to obtain stable income. You can not follow hot growth stocks and not increase their proportion in the portfolio, but you must be clear about the purpose your portfolio hopes to achieve. For example, to ensure that when your children receive university admission notices five years later, you have enough funds for them to complete their studies. Another example is that for the sake of retirement 10 years later, you hope that the income of the fund portfolio during this period can exceed the inflation rate by more than 4%. Therefore, investors should carefully consider the priority of investment goals and investment needs, and whether the order of original goals and needs has changed. If a certain investment in the portfolio cannot achieve the goal, it should be considered for replacement.

2. No core portfolio

If you hold many funds but don’t know why you chose them, your fund portfolio may lack a core portfolio. For each investment goal, you should choose 3-4 funds with stable performance to form a core portfolio, and their assets can account for 70%-80% of the entire portfolio. Overseas, many investors choose large-cap balanced funds as core portfolios.

3. Too many non-core investments

Non-core investments outside the core portfolio can increase the portfolio’s income, but they also have higher risks. If investors invest too much in non-core parts, they may unknowingly bear too high risks, hindering the realization of investment goals.

4. Portfolio “imbalance”

A good fund portfolio should be a balanced portfolio, that is, the proportion of various assets in the portfolio should be maintained in a relatively stable state. Over time, the performance of various investments varies. If certain investments perform particularly well or poorly, it will make the entire portfolio “unbalanced”.

In Morningstar’s evaluation system, the analysis of portfolio asset composition is refined to the stocks and bonds held by the fund, and the analysis of stocks is refined to style, industry, etc. For example, the original asset proportion of the portfolio is 25% for medium-term bonds, 10% for small-cap growth stocks, and 65% for large-cap value stocks. If small-cap growth stocks rise sharply, it may make the proportion of small-cap growth stocks in the portfolio increase significantly. Investors should regularly adjust the asset proportion of the portfolio to restore it to its original state.

5. Too many funds

If holding too many funds, investors are often dazzled and overwhelmed by the long list of funds. You might as well use the standard of “whether the fund can play a certain role in the portfolio” for screening: Is the fund serving as a core fund or a non-core investment? If it is a core investment, is the proportion higher than other non-core investments? Through asset reallocation, investors can reduce the number of funds in the portfolio and increase the proportion of each fund.

6. Improper selection of similar funds

What style are the funds you hold? Do you hold too many funds of the same style? You can classify the funds you hold by style and determine the proportion of each style of fund. When there are too many of a certain type of fund, you should consider choosing the better one in the same performance ranking and selling the worse one.

7. Too high fee level

If two funds are similar in style, performance, etc., investors might as well choose the fund with lower fees. In the long run, there will be a big difference in income between funds with an annual operation rate of 0.5% and funds with a rate of 2%.

8. No selling criteria set

Investors should set quantitative standards for selling funds. For example, you can accept a 15% loss, but a 20% loss will make you uneasy. In addition, if the fund manager is changed, do you sell the fund or put it on the “watch list”? What is the performance benchmark by which you measure fund performance? What is the maximum period you can accept for the fund’s return to be lower than the benchmark? Investors can also design other standards based on their own needs.

Published at: Jul 22, 2020 · Modified at: Jan 14, 2026