Personal Finance (2): The Product Zoo — From Money Market Funds to Gold

Part 1 was about why you spread money across baskets. This is about what the baskets are. Open a bank’s wealth app and the buttons — “Fixed income enhanced,” “Structured deposit,” “FOF,” “Quantitative neutral” — assume you already know what you’re shopping for. Here’s the field guide, one asset class at a time, plus the one table I wish someone had handed me on day one.

The Whole Zoo on One Page#

Everything below fits in a single map. Ranges are typical over a rate cycle; the bracketed figures are current levels as of mid-2026, when Chinese rates hit record lows. The point is the relative position of each animal, not a quotable yield.

Read the rest as footnotes to this table.

Cash Equivalents: The Parking Lot#

Cash equivalents are a parking lot: safe, easy to exit, cheap, and you don’t earn much by parking. Their one job is holding money you’ll need soon without letting inflation gnaw it too fast.

Money market funds (余额宝 is one, wrapped in Alipay) pool everyone’s cash into ultra-short loans — overnight bank lending, one-week repos, 30-day CDs. Short duration plus creditworthy borrowers means tiny risk and tiny return. The trap: comparing two funds’ 7-day yields. On ¥50k, 1.8% vs 2.1% is ~¥150 a year — less than one dinner. Here convenience beats yield. Who it’s for: emergency fund, rent, anything you need within three months.

Demand deposits pay 0.2–0.35% and are insured to ¥500k. Structured deposits link a slice of your deposit to a rate or a gold price: guaranteed principal plus a variable coupon that usually lands on the floor. It’s a parking spot with a lottery ticket taped to the dashboard. Who it’s for: people who want a deposit label and don’t mind locking up for a fixed term.

Bonds: Lending Your Money Out#

You hand over money for a fixed period; the borrower pays interest and returns the principal. Longer term and weaker credit mean higher interest — that’s just the price of “you might not get it all back.”

Government bonds yield ~2.3–2.8% on a 10-year; safest in the domestic market. Corporate bonds pay more (3–4% for big SOEs, 5–7% for shakier private firms) precisely because the borrower might default — that spread is your compensation for credit risk.

The confusing part: how does a bond fund lose money if bonds pay a fixed coupon? Because bond prices move inversely to rates. When market rates rise, existing bonds are worth less, and a fund marks them to market daily, so its NAV drops even while every coupon still pays. In November 2022 China’s bond market sold off and “stable” bond funds fell 1–3% in days — a shock to anyone who thought “bond fund = can’t lose.” Duration measures this sensitivity: longer duration swings harder. A fund with “medium-long duration” in its name will be bumpier. Who it’s for: money you won’t need for 6–18 months and can watch wobble a little.

Equities: Buying a Piece of the Business#

Buy a stock and you own a sliver of a company. No fixed rent — your return rides entirely on how the business does.

Individual stocks are picking one restaurant to back: you’d have to evaluate management, valuation, competition, and whether the product still sells in five years. Most full-time professionals fail to beat a plain index after fees (Fama, Sharpe, Bogle all point the same way); a software engineer with 5–10 hours a month has worse odds. Watch for narrative bias — “I love this brand, so the stock will rise.” Being a happy customer says nothing about whether the price already bakes in your optimism. That gap between “good company” and “good investment at this price” is where retail pickers lose money.

Index funds and ETFs buy the whole basket instead — CSI 300, S&P 500, MSCI EM. You bet on the economy, not one firm. Why I default to them: fees of ~0.15–0.5% versus ~1.5%+ for active funds (that gap compounds into real money over 20 years); hundreds of holdings; full transparency; no star manager whose exit tanks you. ETFs just trade intraday like stocks; index mutual funds price once at close. The cost: they fall when the market falls — the CSI 300 dropped ~30% from its 2021 peak to its 2024 trough. Equities have beaten every other asset class over 20+ year horizons, but the path there is jagged, not a line. Who it’s for: money you can leave alone for a decade and not touch through a −30% year.

Active funds pay a manager to beat the index. Some do; most underperform over 10+ years, mostly on fees. Fine to own — but only with a specific reason (a sector you know cold, a genuinely differentiated strategy), not as a default.

Bank Wealth Management Subsidiaries: The Post-Reform Landscape#

Before 2018, banks sold “wealth products” with implied guarantees — a 90-day product “expected” 4.5%, and the bank ate any shortfall (刚性兑付, rigid redemption). The 2018 Asset Management New Rules killed that: products must be net-value-based and fluctuate. Banks spun off wealth management subsidiaries (理财子公司) to sell them.

Products run R1 to R5:

Most retail buyers sit in R2–R3. Versus public mutual funds: minimums are now as low as ¥1; fees are often buried and harder to compare; many carry lock-ups (30/90/180 days); they’re regulated by the banking side, not the CSRC. The real wrinkle is human — buyers conditioned by the rigid-redemption era still expect a guarantee, so a 0.5% dip triggers complaints. Part 3 is entirely about reading these.

Alternatives: Gold and REITs#

Gold pays no dividend and produces nothing — it just sits there. You hold it because it tends to keep its value when everything else breaks: high inflation, currency crises, geopolitical chaos. It’s insurance, not an investment; its long-run real return is roughly 0–1% a year. Gold is a UPS for your portfolio — dead weight 99% of the time, then the one thing still standing when the power goes out. A 5–10% allocation makes sense as a hedge; hold it via a gold ETF (paper gold and physical work too, futures don’t for beginners). Who it’s for: anyone who wants a shock absorber, not a return engine.

REITs let you own real estate without buying an apartment. China’s public market launched in 2021 and skews to infrastructure — highways, industrial parks, sewage plants. Return is rental yield (3–5%) plus unit price moves. Their appeal is low correlation with stocks and bonds; the risk is rate sensitivity plus concentration — a toll road in a boom region and a mall in a shrinking city are not the same bet. Who it’s for: someone deliberately adding an asset that zigs when the rest of the portfolio zags.

(A note on insurance-as-investment — annuities, 增额终身寿, 万能险: they guarantee ~2.5–3% and lock money for decades behind opaque surrender charges. My rule: buy term life for protection, index funds for returns, and don’t fuse the two — you usually get mediocre versions of both. The one exception is forced saving, if you know you’d otherwise panic-sell.)

The Risk-Return Map: A Mental Model#

Plot everything on two axes — volatility across, expected return up — and one rule dominates: the upper-left corner is empty. Nothing gives high returns with low volatility. If something looks like it does, either the risk is hidden (rare, catastrophic tail losses), the product hasn’t seen a bad market yet, or it’s a scam. This is arithmetic, not cynicism: in a competitive market, any genuine high-return low-risk product attracts money until the return drops or the risk surfaces. So when someone pitches “stable 8% a year,” ask where the risk is hiding — because it is.

Your job isn’t to find the magic product that beats the map. It’s to pick a combination of positions that fits your risk tolerance, time horizon, and goals — which is what Part 1 was about. And the map plots expected returns, averages over many possible futures; the one you actually live can land better or worse. If finance had certainties, there’d be no risk premium to earn.

What’s Next#

Part 3 zooms into the category that trips up the most Chinese retail investors: bank wealth management subsidiaries. How to read a product fact sheet, what “fixed income+” actually holds, how to compare across banks, and the gotchas for first-time buyers. The zoo tour gave you the names of the animals; next we learn to read their body language.

This is Part 2 of the Personal Finance series. Previous: Part 1 — Why Asset Allocation Matters . Next: Part 3 — Bank Wealth Management Subsidiaries .