Asset Classes5 分で読めます

Types of Funds (Equity, Bond, Balanced)

They're all called 'funds,' yet some churn like a roller coaster while others are calm. That difference comes from what the fund holds. How are they divided?

Funds are divided by 'what they hold'

A fund is a product where a professional management firm pools many investors' money and manages it on their behalf. But depending on what that money buys, the character of the risk and return changes completely.

The most basic distinction is by the assets held. If it mainly holds stocks it's an equity fund, if it mainly holds bonds it's a bond fund, and if it mixes the two it's a balanced fund. Knowing this distinction lets you roughly guess a fund's character just from its name.

Equity, bond, and balanced funds

Equity fund: invests most of its assets in stocks. With the aim of growth, its return potential is large, but when the market shakes it swings widely. It's mainly used for long-term goals.

Bond fund: invests in fixed-income securities such as government bonds and corporate bonds. It aims for steady interest income and relatively low volatility. But 'stable' does not mean 'no losses.'

Balanced fund: holds stocks and bonds together. For example, it fixes a ratio like 60% stocks / 40% bonds and manages it, aiming for a middle ground between growth and stability. It's also called an 'asset-allocation' or 'hybrid' fund.

In Korea, holding 60% or more in stocks is commonly classified as an equity fund, holding 60% or more in bonds as a bond fund, and in between as a balanced fund (equity-mixed, bond-mixed).

This classification is by 'what it holds' (asset). 'How it's managed' (index-tracking vs. active management) is a separate distinction.

Risks differ by type

No fund guarantees principal. A fund is a performance-based product that distributes according to results.

Equity funds can suffer large drawdowns in a bear market. Bond funds are relatively calm, but when interest rates rise, the prices of the bonds they hold fall, so losses can occur. People commonly think 'bonds = safe,' but you must know that during a rising-rate period, even a bond fund can go negative.

A balanced fund has both risks mixed, so its character changes depending on the ratio held. A balanced fund with a high stock weight moves closer to an equity fund.

Costs matter as much as the type

Funds have management fees and sales fees deducted each year, and some products have a sales charge (load) attached when you buy or sell.

These costs are hard to notice but eat into returns over the long run. Especially the longer you hold, the greater the cumulative effect of the fees drained each year. That's why you must always compare the fee difference even among funds of the same type.

You can't say in a word whether a fund is 'good or bad.' What matters is understanding what the fund holds, and what risks and costs it bears, and then weighing whether it fits your own goals.

よくある質問

Q. Do bond funds have no losses?

No. Bond funds don't guarantee principal either. In particular, when market rates rise, the prices of already-held bonds fall, so the fund's value can drop. In fact, during periods when rates surged, long-term bond funds sometimes suffered considerable losses. A bond fund merely has smaller swings than an equity fund; it is not a no-loss product.

Q. Which type should a beginner look at first?

Rather than recommending a specific type, the order is to first think about the drawdown you can endure. If you'd struggle to bear big swings, a lower-volatility type may fit; if you can leave it buried for a long time and endure the swings, a growth type may suit your profile. In any case, the habit of checking both costs and the maximum drawdown together is important.