Although funds are recognized as suitable for financial management allocation, will you really choose funds?
As of now, there are more than 9,300 funds on the market, while there are only more than 4,000 stocks on the market. From a purely quantitative perspective, picking a good fund is much more difficult than picking a good stock.
When most people choose a fund, the first thing they think of is looking at historical performance. Those with poor historical performance and poor growth potential are garbage. But in fact, when selecting funds based on historical performance, it is easy to choose explosive players instead of stable players.
Just like student exams, some candidates are lucky before the exam. If they bet on the right issue, they may become a dark horse, but if they bet on the wrong issue, they will lose their reputation. It is difficult for dark horse players to achieve sustained performance, so how should we choose funds that can achieve sustained and stable performance?
In fact, in the fund industry, there is an indicator specifically used to evaluate fund quality, called the Sharpe ratio. This metric represents the excess return generated by a portfolio for each risk it assumes, allowing it to be evaluated. Transaction stability of fund managers.
Generally speaking, if the decline ratio is greater than 1, it means that the return is greater than the risk, and if the decline ratio is less than 1, it means that the return is less than the risk. Sharpe ratio, in practical application, the following points should be paid attention to:
1. The Sharpe ratio is suitable for horizontal comparison of similar funds to choose better funds. For example, you cannot compare elementary school students and college students to see who has better grades. We can only compare primary school students and primary school students in the same grade, and college students and college students in the same major.
2. The Sharpe ratio is used to measure the risk control capabilities of fund managers and is therefore an indicator of actively managed funds. Passive index funds do not use this metric.
3. For ordinary investors with low risk tolerance, it is best to choose funds with a Sharpe ratio higher than 1. Usually funds with a Sharpe ratio higher than 1 are debt-based or hybrid funds. If you hold such excellent funds in the long term, there is basically no problem in outperforming financial management.
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标签： #Fund #Ratio #Rating #Financial Management #Similar
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