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fixed income investments
Mutual funds and ETFs
traded on stock exchange
ETFs
capitalization weighting
weighted based on market cap size
equal weighting
all stocks weighted equally
ETF and stock similarities
trade on stock exchange, bought and sold throughout trading day, purchased through brokerage account
ETF and stock differences
etf share has basket of securities based on market index or sector, built in diversification with ETFs and less volatility
mutual funds and ETF similarities
pool money from investors to buy investments, diversification, variety of investments
stocks
trade on stock market, high volatility with some stocks, personal diversification
ETFs
traded on stock exchange, bought and sold through trading day, diverse, variety and less volatility, directly track and follow an index. PASSIVE
mutual funds
not traded on stock market, diversification, wide variety of investments, bought and sold once per day, actively managed. ACTIVE
mutual fund and etf differences
MF bought and sold once per day and actively managed. ETF actively bought and sold, passively manged
MER
higher on mutual fund because actively managed
Costs of buying and selling MF
management and operational fees, minimum investment amount
costs of buying and selling ETFs
trading fees, brokerage commisions
Passive
ETFs- replicated performance of index
Active
MF- actively managed by managers each day
tips for choosing your ETF or MF
fund size, age, costs, past performance, current news
morning star ratings conditions
min 3 years established, min 20 funds, rating based on risk and return
Bonds
loans to financial institutions in exchange for interest and principal returned, conservative income, low risk, more liquid
GIC
loans to financial institution in exchange for principal + interest, low risk, less liquid, higher rate of guaranteed return
T bills
sold at discount, issued by govt, short term investment
commercial paper
issued by financial institution or corporation, alternative for bank borrowing by large corps
laddering your investments
have investments mature at different times
lowest to highest risk
t bills, GIC, commercial paper, bonds
zero coupon bond (strip bond)
coupon stripped from principal and interest is sold seperately
default risk
chance that bond issuer will go bankrupt and unable to pay back obligations
currency risk
possibility of losing money due to unfavorable currency exchange rate
interest rate risk
the fixed rate of interest may be unfavorable compared to current risk
inflation rate risk
the interest does not equal the inflation
high risk bond rating
CCC
low risk bond rating
AAA
stages of saving and investing
put and take account, beginning to invest, systematic investing, strategic investing, speculate investing
put and take account
regular spending account
beginning to invest
low risk investments
systematic investing
investing on regular and planned basis
strategic investing
balancing loss and gains through diversification
speculative investing
high risk investing
tips for new investors
choose low risk, diversify, blue chip to start
dollar cost averaging
investing on regularly scheduled basis regardless of price, risk of high trading fees
couch potato investing (index investing)
purchase a few index MF/ETF that follow a benchmark and offer diversification, re-balance once a year
Note
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