As investors in bond funds, it's important to understand the fund's net asset value (NAV) and the valuation of its underlying bond assets.

1. Fund NAV

For fund products, NAV refers to the value per unit. Fund NAV = (Total Fund Assets - Total Fund Liabilities) / Total Number of Fund Units.

Fund NAV is one of the fundamental indicators for investors to understand fund performance, reflecting the fund's investment results and market value. Investors can assess investment returns by comparing NAV at different time points. Daily NAV fluctuations are directly tied to changes in "asset value" - NAV growth typically indicates asset appreciation, while NAV decline may suggest a reduction in "nominal" asset value.

For bond funds, assuming no default events in the underlying bonds, changes in portfolio value are primarily accounting representations. Unlike equity funds, bond funds hold a basket of bonds. The "basket" provides better liquidity and risk diversification, while "bonds" represent an "income floor" - the coupon payments from these bonds, with each underlying bond ultimately returning principal and interest at market yield upon maturity.

2. Bond Valuation

For individual bond valuation (assuming no default), valuation fluctuates around the coupon rate as a central point while also being influenced by recent market transaction prices (which reflect trading sentiment). Over the long term, as bond interest accrues daily in valuation, the bond's valuation will always revert toward its coupon rate.

Therefore, for bond funds, as long as there are no defaults or major credit events in underlying assets, bond market price volatility will largely be smoothed out by daily coupon accruals over time, manifesting as "natural recovery" in fund NAV.

3. Investor Understanding and Application

Investors should rationally evaluate fund NAV performance. While NAV reflects historical performance and management skill, focusing solely on absolute NAV values or short-term trends is misguided. When using NAV for performance evaluation, investors should make trade-offs among three dimensions: "return level," "risk degree," and "volatility." In investment theory, these form an "impossible triangle" - no strategy or asset can simultaneously optimize all three. Investors must compromise on one factor when evaluating the other two, comparing both against historical performance and peer funds.

For example:

- Conservative investors prioritizing safety and low volatility should accept lower returns;

- Aggressive investors seeking higher returns must tolerate greater NAV volatility and potential losses;

- Balanced investors focus on safety but accept some volatility for moderately higher returns.

How to quantify NAV volatility and return ranges?

- <2% drawdown: Ultra-low volatility (e.g., bank wealth products), 2-3% annualized returns;

- 2-4%: Low volatility (e.g., stable bond funds), 4-6% returns;

- 4-6%: Moderate-low volatility (e.g., fixed-income+ strategies), 5-8% returns;

- 6-8%: Moderate-high volatility; >8%: High volatility (equity strategies), with uncertain returns including potential losses.

Different funds have varying assets, strategies, and manager capabilities, so generalizations aren't appropriate - each case requires individual analysis.

Bond funds' positioning makes them ideal core assets for conservative investors.

How to select a bond fund?

Prioritize risk control (examining underlying holdings and strategies), then choose a product with acceptable volatility/return balance. Note that bond funds aren't volatility-free (no NAV-based product is), but typically <4% drawdowns are reasonable.

What attitude should investors maintain when holding bond funds?

Given NAV's natural recovery property, long-term holding is optimal - stable returns accumulate over time if underlying bonds remain sound. Evaluating performance over days/weeks contradicts value investing logic; monthly volatility and annual returns are more appropriate metrics. Additionally, the best times to add positions are during NAV corrections or sideways movements - aligning with the basic logic of "buying low."