Ben Chuanlong Du's Blog

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Diversified Investment

Things on this page are fragmentary and immature notes/thoughts of the author. Please read with your own judgement!

  1. Index funds, ETFs and mutual funds are some popular ways of diversified investment. A mutual fund is actively managed (by a portfolio manager) while an index fund or ETF is passive managed.

  2. Generally speaking, index funds and ETFs have lower expense ratios than mutual funds and thus are preferred to mutual funds.

  3. ETFs can be traded any time during open market hours while index funds and mutual funds are traded only once per day, which means that ETFs have higher lidiquity and thus is preferred. However, it's a different story for dividends focused ETFs. You have to be cautious about ex-dates of ETFs and hold ETFs for required time to be considered as "qualified dividends" (instead of "ordinary dividends").

  4. Index funds are popular for retirement accounts.

  5. Dividends of MMFs are taxed as income. ETFs' dividends can be "ordinary dividends" or "qualified dividends" depending on the how long that you hold it. Ordinary dividends are taxed as income while qualified dividends are taxed as (short-term or long-term) capital gains.

  6. It seems that a MMF can only be purchased via the brokerage who owns it.

Money Market Funds (MMFs)

Tips on Money Market Fund

ETFs

Below are some popular ETFs.

  • QQQ
  • VB
  • TLTW
  • CIBR

References

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