Unwittingly, the series of "playing the bond market" has been updated to the ninth issue, and some readers reflected, "Niuniu, can you talk more about risk aversion? if you don't find out the minefield before investing, it makes people feel uncertain."... "Today, Niuniu is going to popularize science about how to" mine "in advance in the bond market.

As this issue has reached the stage of advanced players' spiritual practice, it is recommended that you review the bond risk section first."Test it: are you a risk averse person?"To avoid the arrival of the enemy and send money with a silly face.

In the bond market, credit risk and interest rate risk are the two most common "bullies" on the way to making money, taking away interest or even principal when you are caught off guard. Can't you escape even if the "bully" comes? Of course not, as long as you take precautions in advance and have knowledge in mind, it is still possible to be unharmed when you encounter risks.

01 Avoid the "most rogue bully"-- credit risk

In the seventh phase"revealing the risk nemesis: credit rating system"Niuniu has mentioned how to avoid credit risk. Credit risk has won the title of "the most rogue and helpless bully" in the whole risk family by virtue of the divine logic of "borrowing you money and owing you interest to swallow your principal".

However, the combat effectiveness of credit risk is relatively weak, if investors do their homework in advance, they can be evaluated and defended in advance. At this time, the "credit rating system" has become the most straightforward and efficient reference tool. Almost all credit rating agencies have a symbolic system to judge the default risk of different bonds in the market, of which the most authoritative and influential are the "Big three" of the international rating industry-Moody's Corporation, Standard & Poor's and Fitch Group.

According to the criteria of the Big three, the credit degree of bonds is divided into investment grade and speculative grade. Investment grade bonds have higher reputation and less risk of default, especially those above AA grade, which are favored by conservative investors. Speculative grade bonds are considered to be highly speculative and have a high risk of default, but they often attract groups of bold investors because of their high yields.

Of course, if you buy bonds according to your credit rating, you can avoid becoming a villain, and credit risk will not defend its title as the "most rogue and most helpless bully". In practice, credit rating can only play a limited role in investment decisions, and must not be blindly superstitious.

To invest in the bond market, we should not only carefully understand the situation of the bond issuer in advance, and try our best to avoid investing in corporate bonds with poor operating conditions or poor reputation, but also pay close attention to the market situation and the changes in the operation of the company during the period of holding bonds, so as to sell bonds in time to reduce losses.

When you treat your wallet, you should pay more attention to it. Sometimes it's not that bullies are too scoundrels, but that investors don't take them seriously.

02 Escape from the "most difficult bully"-interest rate risk

Interest rate risk is the "most haunting bully" because the market is changing all the time, and interest rate volatility is all too common. If the market interest rate falls during the holding period, then the intrinsic value of the bond will rise, and the market price will rise accordingly. But if the opposite happens and the market interest rate rises, then the market price of the bond will fall, and the bond you buy will no longer smell good.

What? You said you forgot the logic of the relationship between market interest rates and bond prices! Go back to the cheat sheet."Bonds never bully honest people."!

In addition to letting bonds "go down", interest rate risk bullies have also nourished a group of younger brothers-"inflation risk", "reinvestment risk", "currency risk" and so on, ambushing together on the gold digging road, waiting for an opportunity to dig holes for some "stupid fufu" investors. So how to get rid of this clingy interest rate risk?

Long-and short-term cooperation

No investor can fully predict the direction of the market, so betting all money on the same type of bonds is highly likely to be risky. As we mentioned in the previous risk section, if you buy short-term bonds instead of long-term bonds, there may be no products with higher yields than before after the maturity of short-term bonds, which is the reinvestment risk. But if you bet all on long-term bonds, you are more likely to be affected by changes in interest rates during the holding period.

Now you should be able to see the tact of long-term and short-term cooperation, right? Through long-term and short-term cooperation to spread the maturity of bonds, but also spread the concentration of interest rate risk. If interest rates rise, short-term investments can quickly find high-yielding investment opportunities. If interest rates fall, long-term bonds can also keep yields high.

Options-give you a chance to regret

Do people usually have the consciousness to buy insurance? In the financial market, there is also such a product to hedge risk, and that is Option.

Suppose Xiao Ji is bullish on the bond market and wants to buy a large share of bonds, but he does not have so much money now. Apart from muttering to himself, Xiao Ji discussed with Xiao Jin that he bought options from Xiao Jin when he bought the bond. The option contract stipulates that Xiaoji can buy 20 bonds from Xiaojin at the price of 100 yuan each within three months. as compensation, Xiaoji needs to pay Xiaojin 5 yuan each as an option fee.

If the price of the above-mentioned bonds rises to 120 yuan per share within 3 months, Xiaji exercises the option to buy the bonds, and the income (120,100) X20 = 400 yuan can be obtained from the price difference between the current market and the co-pricing. After deducting the option fee, it can make a profit of 400-20X5 = 300 yuan. If the bond price falls within 3 months and falls below 100 yuan, then Xiaoji has to give up the option, and the total loss is only 100 yuan in the option fee.

Is that Kim a philanthropist? Of course not, it's just that Xiao Jin and Xiao ji (both buyers and sellers) have different valuations on the future price of the subject matter. Xiao Ji is bullish on interest rates. He bought it called "Call option」Call(I call on the option), this is Call Buyer. While Xiao Jin is bearish on interest rates, what he sells is "Put option」Put(I want to put this away), this is Put Seller (also known as Put Writer).

100 yuan is called "Option feeIt is the price that Xiao Ji paid for getting the option. 100 yuan per order (the future transaction price agreed by both parties) is called "Exercise price". The option in the example is three months old, so it will be three months later. "Expiry date". After the expiration date, the option has no value.

If you are given the right to go back on your promise, are you willing to buy it in advance?

03 The Tip of protecting oneself-- three principles of Bond Investment

Of course, for the vast majority of investment rookies, it is not easy to get rid of these two risky bullies at the beginning. Which expert didn't grow up after capsizing all the way (alas, accidentally debunking the truth)? Here we have to mention the three major principles of bond investment that condense the blood, sweat and tears of our predecessors, and keep this set of "physical and mental protection decisions" in mind when allocating them, which directly reduces your chances of "falling into the ditch".

Matching principle

When investing, different bond investment methods must be chosen according to the amount of funds, the investment period, the stability of funds and other characteristics. At the same time, to match your personal needs, if you are adventurous, you may want to allocate some high-yield and high-risk bonds; if you look like low risk, invest in bonds above AA. Go back to the cheat sheet."Investment astrology, what kind of bond player are you?"。

Principle of diversification of investment

"Don't put all your eggs in the same basket" is the rule of all investment gods. Whether it is bond holdings, duration, or long-and short-term bonds, you should consider decentralized allocation, and do not concentrate your money too much on one bond. Do not concentrate on "crazy spending" at one point in time, lest the whole army be wiped out.

Portfolio investment principle

Recite "the return on investment is proportional to the degree of risk" a hundred times before investment! Here, we advise you to spread the risk into different portfolios after determining your expected return. Even if you are an adventurous investor, you need to allocate some reliable investment grade bonds to get a higher comprehensive return.

04 Conclusion

For the two most common types of risks in bond investment-credit risk and interest rate risk, investors can reduce losses if they do their homework in advance. This requires that we should be familiar with the rules of the bond market in advance and learn to use the credit rating system, long-term and short-term coordination and options to keep in mind the principles of diversification, portfolio investment and matching. The most important thing is to take your wallet seriously and keep a close eye on market changes.

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