Using asset allocation theory, using multiple funds to build a fund portfolio can often reduce fluctuations while increasing returns. This is an investment truth recognized in theory and proven in practice.
Investing itself is not a static process. If you want to obtain long-term steady returns by purchasing a single fund, the process is a great test of investors' perseverance and patience. Therefore, when selecting a fund, the maximum retracement rate is an indicator to focus on: it reflects the maximum loss margin that the fund may face or the biggest pullback that the fund may face after an increase in its performance.
However, even if you are aware of a fund's maximum retracement rate before you buy it, your heart will still panic when you actually face a decline. As an ordinary person, it is inevitable that there is a tendency to hate loss, and the pain brought about by loss on the book is often more intense than the pleasure brought by profit on the book. Building a fund portfolio is a good way to “obtain long-term returns on the basis of managing maximum drawdown”.
So, how do you structure a fund portfolio? I once read an article summarizing the “eight taboos” of fund portfolios: no clear investment targets, no core portfolio, too many non-core investments, unbalanced portfolios, too many funds, too high cost levels, no standards to be willing to sell, and improper selection of similar funds.
Turns out... building your own fund portfolio isn't as simple as copying homework from top students. Is that a better fit...