Episode 01 - Investing on the mainland
|A: So what can I do for you today?
B: I’m looking to invest $10 000 into an index fund and I was wondering about which funds you have for the Chinese mainland market.
A: We only have mutual funds for the Chinese market. Unfortunately there is no index fund for the mainland yet.
B: Really? I really don’t want to buy mutual funds because of the fees. Is there any other way to get a piece of the action?
A: You could buy multinationals that do a lot of business in China. That’s one indirect way of doing it and you’d be able to avoid the fees. I’d still recommend, however, that you buy a mutual fund to diversify.
B: Well, I’m not surprised. I’m sure you get a nice commission on that. But maybe I should buy one because I really would have no idea what to choose on my own and a $10 000 investment isn’t a lot to play with.
Key vocabulary and phrases that are discussed in the podcast:
Index fund: A passively managed group of stocks. Index funds have rules for which kinds of stocks will be part of the fund. The stocks are not chosen by a person so they are cheaper than mutual funds. One index fund might be all the stocks on the Toronto Stock Exchange.
Mutual fund: An actively managed group of stocks. There is a team of people who choose which kind of stocks will be part of the fund. When you buy them you have to pay a commission of often 2% per year regardless of whether or not the fund makes any money.
Get a piece of the action: It means to join in on something that is hot or going really well.
Multinationals: Short for multinational corporation. These are large companies that do business in several different countries. Macdonald’s and Microsoft are two examples of Multinationals.
Diversify: Invest your money if many different things to reduce risk. If you invest all your money in one thing only, you have a higher chance of losing a lot of money.
Money to play with: If you have money that you are willing to invest, then we often call this money to play with. It also implies that it is money that you can afford to lose.