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Personal Finance | 004 What ETF to Buy When There’s High Risk of Economic Downturn

2/25/2024

Summary: ETF for consumer staples, healthcare, utilities, and telecommunications sectors—industries that tend to remain stable regardless of market fluctuations.

When looking for ETFs that focus on companies with more downturn-resistant characteristics, you typically seek defensive stocks that can better withstand economic downturns than growth-oriented or cyclical companies. Defensive stocks often belong to consumer staples, healthcare, utilities, and telecommunications sectors—industries that tend to remain stable regardless of market fluctuations. Below are several categories of downturn-resistant ETFs:

Consumer Staples ETFs tracks companies produce essential goods like food, beverages, household products, and personal care items, which people continue to buy even during recessions. Consumer Staples ETFs: XLP, VDC, and FSTA.
Healthcare ETFs remain stable during downturns because Healthcare products and services are necessary, regardless of the economic climate. ETFS: XLV, VHT and FHLC.
Utility ETFs Utility companies (e.g., electricity, water, and gas providers) are often considered recession-proof because people continue to need these services regardless of the economic situation. ETFS: XLU, VPU, FUTY
Dividend-Paying ETFs Dividend-paying companies are well-established, financially stable, and resilient during downturns. These companies usually have a history of generating consistent cash flows. ETFS: DVY, VIG, FDVV
Low Volatility ETFs Low-volatility ETFs focus on stocks with lower price fluctuations, providing a smoother ride during market downturns. ETFS: USMV, SPLV, FDLO

These ETFs provide exposure to sectors that are less sensitive to economic fluctuations and may offer more stability in downturns.

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Personal Finance | 006 The Top ETF Options

2/18/2024

Summary: FXAIX is has lowest cost for S&P 500. VGT, QQQ/QQQM focus on technology. Pay attention to management fees along with ROI.

Exchange-traded funds (ETFs) are popular investment vehicles for investors seeking low-cost, diversified exposure to various stock market segments. Below, we'll explore the following ETFs, detailing their management fees, past 20 years' return on investment (ROI), and the significant segments they focus on, specifically targeting large companies.

1. VOO (Vanguard S&P 500 ETF) and VFIAX (Vanguard 500 Index Fund Admiral Shares) Both VOO and VFIAX focus on the S&P 500 index, which includes 500 of the largest U.S. companies across all sectors, with technology, consumer discretionary, healthcare, and financials being some of the most significant contributors to the index.VOO and VFIAX include prominent companies such as Apple, Microsoft, and Amazon.

Management Fee: VOO (0.03%), VFIAX (0.04%)
Past 20-Year ROI: Around 8-9%

2. SPY (SPDR S&P 500 ETF Trust) Like VOO and VFIAX, SPY also tracks the S&P 500 index, exposing the largest U.S. companies across various sectors.

Management Fee: 0.0945%
Past 20-Year ROI: Around 8-9% annually

3. FXAIX (Fidelity 500 Index Fund) Similar to the other S&P 500 ETFs, FXAIX focuses on the S&P 500 index, investing in the largest U.S. companies, including technology, finance, and consumer sectors.

Management Fee: 0.015
Past 20-Year ROI: Around 8-9% annually

Note: SPY has high management fee but large trading volume so it is easier to trade. We only need to pick one of the S&P 500 ETF to invest. There are overlaps between S&P 500 and VGT/VCR discussed as follows so properly allocate the portfolio to ensure diversity. Use etfrc.com to check overlaps.

4. VCR (Vanguard Consumer Discretionary ETF) VCR focuses on the consumer discretionary sector, investing in companies involved in goods and services that are non-essential, such as Amazon, Tesla, and Nike. VCR provides targeted exposure to companies that thrive on consumer spending in discretionary goods, which tend to outperform during periods of economic growth.

Management Fee: 0.10%
Past 20-Year RO: Around 10-11% annually

5. VGT (Vanguard Information Technology ETF) VGT invests primarily in technology companies, including large-cap leaders like Apple, Microsoft, and NVIDIA.VGT focuses on the technology sector, one of the best-performing sectors over the past two decades, driven by advances in cloud computing, artificial intelligence, and semiconductors.

Management Fee: 0.10%
Past 20-Year RO: Around 10-12% annually

6. QQQ (Invesco QQQ Trust) and QQQM (Invesco NASDAQ 100 ETF)Both QQQ and QQQM track the NASDAQ-100 Index, focusing on large-cap companies in technology, biotech, and consumer services. Major holdings include Apple, Amazon, and Alphabet.

Management Fee: QQQ (0.20%), QQQM (0.15%)
Past 20-Year ROI: Around 10-12%

7. SMH (VanEck Vectors Semiconductor ETF)SMH targets the semiconductor industry, investing in large companies such as Taiwan Semiconductor Manufacturing Company (TSMC), NVIDIA, and Intel. The semiconductor industry has experienced significant growth, driven by the increasing demand for chips in various sectors like electronics, automotive, and artificial intelligence.

Management Fee: 0.35%
Past 20-Year ROI: Around 10-12% annually

8. MAGS (The Roundhill Magnificent Seven ETF ) offers equal weight exposure to the “Magnificent Seven” stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. MAGS is the first-ever ETF to track the Magnificent Seven.

Management Fee: 0.29%
Start Year: 2023

In Summary, Each of these ETFs provides exposure to major segments of the U.S. stock market, with some focusing on broad indices like the S&P 500 (VOO, SPY, FXAIX) and others targeting specific sectors like consumer discretionary (VCR), technology (VGT, QQQ, QQQM), and semiconductors (SMH). With low management fees and strong long-term returns, these ETFs are popular for investors seeking exposure to large-cap U.S. companies. The historical returns for most of these funds have averaged around 8-12% annually over the past 20 years, making them solid choices for long-term investment.

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Personal Finance| 002 Why You Would Invest in S&P500 and How To

2/11/2024

Summary: Investing in a stock index fund is a simple, aggressive investment strategy. One of the best options is the S&P 500, which has a high return on investment and relatively low volatility, especially when the US economy is performing well. Multiple different S&P investment options are available in the market, so choosing ETF or Mutual funds with low management fees, such as VOO or IVV ETF, is advisable, as they can be a more beneficial choice.

The S&P 500, which stands for the Standard & Poor’s 500, is a stock market index that tracks the performance of 500 largest public companies across 11 sections in the United States. It represents approximately 80% of the total US stock market capitalization, so it serves as a benchmark for the overall health of the US stock market. Investors widely use it to gauge market performance.

S&P 500 company lists are changing over time by an S&P Dow Jones Indices committee. They review company eligibility and make adjustments, such as adding or removing companies, based on their market capitalization, liquidity, and sector representation. The index is weighted by market cap, meaning larger companies significantly influence its performance.

The S&P 500's 11 sectors are based on the Global Industry Classification Standard (GICS). We can invest in the S&P 500 through ETFs or mutual funds. Typically, mutual funds have low management fees but more taxable activities. Therefore, mutual funds is ideal for tax-free retirement account like Roth IRA. CSPX, as an international ETF, has restrictions and tax implications for US citizens. Therefore, top choices include ETF IVV, ETF VOO, and Mutual Fund FXAIX.

Over the past 30 years (1995 – 2025), the S&P 500 has delivered an average annual return of approximately 10%-11%, including dividends. This long-term growth underscores its reputation as a reliable wealth-building vehicle.

In summary, the S&P 500 is more than just a stock market index; it’s a mirror of the U.S. economy and a powerful tool for investors to build long-term wealth. By understanding its sectors, investing options, and tax implications, you can make informed decisions to grow your portfolio. Over its history, the S&P 500 has proven its resilience, making it a cornerstone of smart investing strategies.

Note: Don’t use activate portfolio management, which generally comes with high commission fees. Please don’t work on individual stock because you will never get enough information to predict it is gross. Don’t invest in an annuity or whole life insurance because there are so many terms, you lose flexibility, and the fees are so high. Keep your investment simple and manageable.

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Personal Finance | 005 ETFs vs. Mutual Funds: A Clear Comparison

2/4/2024

Summary: ETFs are ideal for cost-conscious, hands-on investors who seek flexibility. At the same time, mutual funds are better suited for those who value professional management and prefer a long-term, passive investment approach. Understanding these differences can help investors align their choices with their financial goals. ETF is a better option for traditional IRA, Roth IRA, and personal investments.

ETFs and mutual funds are popular investment options that offer diversification and access to various assets.

ETFs, or Exchange-Traded Funds, are on-exchange funds that can be traded on an exchange, similar to stocks, allowing for multiple trades throughout the day. They were launched in 1993 with the SPDR S&P 500 and were designed to provide a flexible, cost-effective alternative to mutual funds, combining stock-like trading with diversification. ETFs have a lower minimum investment requirement (for example, $500 for VGT), decreased management costs (like VOO's 0.02%), the ability to trade throughout the day, and greater tax efficiency due to "in-kind" transactions. However, they offer limited access to active management, which comes with the potential risk of over-trading.

Mutual funds are off-exchange funds traded by companies, meaning they only trade at the end-of-day closing price. Mutual funds were introduced in 1924 with the Massachusetts Investors Trust, although their origins date back to the 18th century. These funds offer professional management and diversification for everyday investors, making them suitable for long-term investment strategies. However, there are several considerations to keep in mind. Mutual funds often have high balance requirements, higher management fees, and lower tax efficiency. Additionally, they are tied to specific trading platforms and do not allow intraday trading.

The following are some popular mutual fund and ETF management fees (as of 2025)

Vanguard 500 Index Fund (VFIAX) Mutual Fund 0.04%
Vanguard S&P 500 ETF (VOO) ETF 0.03%
Fidelity 500 Index Fund (FXAIX) Mutual Fund 0.015%
Schwab S&P 500 Index Fund (SWPPX) Mutual Fund 0.02%
SPDR S&P 500 ETF Trust (SPY) ETF 0.0945%
iShares Core S&P 500 ETF (IVV) ETF 0.03%

Let's talk about tax efficiency. The ETF does not distribute capital gains. So, the only tax the investor faces is on capital gains when selling the shares. The annual return remains unaffected by taxes for the first 10 years. The mutual fund distributes capital gains annually. Let's assume the fund generates capital gains of $200 in the first year, distributed to the investor. The investor would pay a 15% tax, resulting in $30 in taxes. The tax reduces the return for the investor each year.

Scenario:

Initial Investment: $10,000
Annual Return: 7%
Management Fee: 0.015%
Capital Gains Tax: 15% (for mutual fund)
Time Horizon: 10 years
Total Gain Calculation After 10 Years

ETF (Tax-Efficient):

Adjusted annual return after management fee: 7% - 0.015% = 6.985%
Future Value of ETF: FV = $10,000 × (1 + 0.06985)^10 = $20,154.03
ETF Total Gain: $20,154.03 - $10,000 = $10,154.03

Mutual Fund (Tax-Efficiency):

Adjusted annual return after management fee: 6.985%
Effective return after taxes (15% tax on capital gains): 6.985% × (1 - 0.15) = 5.93725%
Future Value of Mutual Fund: FV = $10,000 × (1 + 0.0593725)^10 = $17,913.13
Mutual Fund Total Gain: $17,913.13 - $10,000 = $7,913.13

Summary:

ETF Total Gain: $10,154.03
Mutual Fund Total Gain: $7,913.13
Difference: $2,240.90

In summary, ETFs are ideal for cost-conscious, hands-on investors who seek flexibility. At the same time, mutual funds are better suited for those who value professional management and prefer a long-term, passive investment approach. Understanding these differences can help investors align their choices with their financial goals.

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Personal Finance

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Personal Finance | 004 What ETF to Buy When There’s High Risk of Economic Downturn

Personal Finance | 006 The Top ETF Options

Personal Finance| 002 Why You Would Invest in S&P500 and How To

Personal Finance | 005 ETFs vs. Mutual Funds: A Clear Comparison

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Personal Finance | 004 What ETF to Buy When There’s High Risk of Economic Downturn

Personal Finance | 006 The Top ETF Options

Personal Finance| 002 Why You Would Invest in S&P500 and How To

Personal Finance | 005 ETFs vs. Mutual Funds: A Clear Comparison

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