Core Viewpoints - Investors should carefully assess their risk tolerance when selecting funds, opting for those that align with their risk preferences, have experienced research teams, stable investment strategies, and robust risk control [2][3] - It is essential for investors to move beyond a single focus on returns and to construct diversified portfolios with funds that have different risk-return characteristics to mitigate risks during market volatility [2][3] - Emphasizing a long-term holding strategy can help investors avoid short-term timing and emotional decisions, leveraging time to smooth out market fluctuations and reduce the investor return gap [2][3] Summary by Sections Low Volatility Debt Products - Conservative mixed funds have an investor return gap of -0.86%, and fixed income funds have a gap of -0.62%, significantly better than the -2.65% gap of actively managed equity funds [3][23] - The lower investor return gap in debt products is attributed to their defensive nature and lower volatility, which helps reduce short-term trading impulses among investors [6][23] Passive Broad-based Products - Broad-based passive funds stand out with a positive investor return gap of 2.81%, particularly due to significant inflows from institutional investors during market lows, which did not participate in previous downturns [3][9] - The influx of funds during low market phases, especially from state-backed entities like Central Huijin, has contributed to the positive investor return gap in broad-based ETFs [9][10] Improving Investor Returns - To enhance investor returns, a collaborative ecosystem between demand and supply sides is necessary, focusing on rational decision-making and systematic fund selection frameworks [17][18] - Investors should clarify their risk preferences to ensure alignment with their investment choices, reducing decision-making errors due to risk mismatches [18] - Long lock-up periods in certain funds, such as pension target FOFs, have shown better investor return gaps, as they help mitigate frequent redemptions during market volatility [19][20]

Core Viewpoints - The article discusses the disparity in investor returns across different types of funds in the Chinese public fund market, highlighting that conservative mixed and fixed-income funds exhibit lower negative investor return differentials compared to actively managed equity funds, which have significantly higher negative differentials [2][24]. - Passive broad-based funds, particularly ETFs, show a positive investor return differential of 2.81%, attributed to significant inflows from institutional investors during market lows, which contrasts sharply with the negative differentials of actively managed equity funds [2][7][24]. - The article emphasizes the importance of investors assessing their risk tolerance and adopting a diversified investment strategy to mitigate risks and enhance long-term returns [2][24][26]. Summary by Sections Investor Return Disparities - Conservative mixed funds have an investor return differential of -0.86%, while fixed-income funds show -0.62%, both significantly better than the -2.65% of actively managed equity funds [2][24]. - The lower return differentials in conservative mixed and fixed-income funds are linked to their lower volatility and defensive investment nature, which helps reduce short-term trading impulses among investors [4][24]. Performance of Passive Broad-Based Funds - Broad-based passive funds, especially ETFs, have attracted substantial institutional investment, particularly from state-backed entities like Central Huijin, during market lows, leading to a positive investor return differential [2][7][8]. - The influx of funds into ETFs during market lows has been a critical factor in achieving a positive return differential, as these funds did not participate in the preceding market downturns [7][8]. Recommendations for Investors - Investors are advised to carefully evaluate their risk tolerance and select funds that align with their risk preferences, focusing on those with experienced research teams and stable investment strategies [2][24]. - A diversified investment portfolio that includes funds with varying risk-return characteristics is recommended to enhance resilience against market volatility [2][24][26]. - Emphasizing a long-term holding strategy can help investors avoid the pitfalls of market timing and emotional decision-making, ultimately leading to better long-term asset appreciation [2][26].

Core Viewpoint - The report suggests that investors should break free from a single-minded focus on returns, actively avoid short-term timing and emotional decisions, and leverage the power of time to smooth out market fluctuations [2][6]. Summary by Sections Investor Return Gap - The report analyzes the "investor return gap" in the context of the Chinese market, focusing on the difference between fund returns and investor returns as of December 31, 2024, highlighting the impact of timing decisions on final returns [2]. - Investor returns are typically lower than fund returns due to poor timing decisions, leading to a "buy high, sell low" phenomenon [2][3]. Performance of Different Fund Types - As of December 31, 2024, the five-year annualized investor return gaps for higher-risk products like equity-focused funds are -2.17%, -2.65%, and -3.59%, while lower-risk products like conservative mixed funds and fixed-income funds show gaps of -0.86% and -0.62% respectively [3]. - Despite higher fund returns in aggressive equity funds, investor returns lag significantly due to high volatility associated with these products [3][4]. Behavioral Insights - Investors often overlook potential risks due to blind chasing of high returns, leading to lower investor returns compared to fund returns, particularly in sector funds that attract significant follow-on investments during market upswings [4]. - When sectors face downturns, investors may panic and sell at low points, missing out on potential rebounds [4]. Sector-Specific Analysis - The report highlights the investor return gaps in the healthcare and consumer sectors, with five-year annualized gaps of -7.70% and -7.11% for healthcare, and -5.16% and -5.36% for consumer sectors [5]. - The surge in demand during 2020-2021 was followed by a decline in growth, leading to net outflows from these sectors [5]. Recommendations for Investors - Investors are advised to carefully assess their risk tolerance and select funds that align with their risk preferences, emphasizing the importance of a diversified investment portfolio to mitigate risks [5][6]. - The report advocates for a long-term holding strategy, encouraging investors to avoid short-term timing and emotional decisions to enhance long-term asset appreciation [6].