The full name of ETF fund is trading open index fund, which may be difficult to understand just by looking at the name. Let me explain here. Openness is easy to understand. We know that closed-end funds have closed-end periods. During the closed period, funds cannot enter or leave at will. Open-end fund is a fund with no closed period, and ETF is a special open-end fund, which is unique in that it can be bought and sold like a stock. Learn the basics of ETF with you today.

What's the difference between ETF funds and ordinary open-end funds?

Ordinary open-end funds can only purchase or redeem a certain share of funds in cash through brokers or fund companies. ETF funds can be listed and traded on the exchange like stocks, so buying and selling are all cash transactions, and a basket of stocks can also be purchased or redeemed through securities companies. This basket of stocks refers to all the constituent stocks allocated by ETF funds.

Index ETF is a passive investment, which completely tracks the index performance. The allocated stocks and the weight of each stock are the same as the tracked index. Actively managed ETFs can operate constituent stocks and let the market make the yield higher.

Purchase and redemption of ETF funds

For example, SSE 50ETF fund. If you want to purchase, you must buy 50 constituent stocks to exchange the corresponding ETF shares, and you can't buy them directly in cash; If you want to redeem your shares, you will get 50 shares instead of getting cash back. Moreover, there is a threshold for buying ETFs, generally at least 500,000. Therefore, the purchase or redemption of ETF is for the wealthy who are not afraid of trouble, and has little to do with ordinary retail investors.

The reason why it is so complicated is that investors buy in cash, and fund companies get the money and then allocate stocks, which will lead to tracking errors. Similarly, cash redemption requires the fund company to reserve some cash, which will interfere with the management and operation of the fund. Therefore, it is best for ordinary investors to buy and sell cash directly in securities accounts.

What are the advantages of ETF funds?

1. The threshold is low, and the new ETF can be subscribed in cash before listing. Generally, you can participate as long as 1000 yuan or more.

2.ETF is generally a tracking index. Buying an ETF is equivalent to 90% of people outperforming the proceeds. A few active ETFs can also choose theme ETFs managed by star fund managers, such as Semiconductor 50 and 5GETF.

3. The transaction cost is low, the subscription fee is only half of that of ordinary funds, the management fee and custody fee are only one third of that of ordinary funds, and there is no stamp duty on stocks.

What is the yield of ETF funds?

Index ETF is definitely closely related to the trend of the market. For those who don't have time to study stocks or lack the ability to speculate in stocks, buying index ETFs can just follow the ups and downs of the market, make money easily, and the yield is much better than those who chase up and down in the short term.

Now there are more and more active ETFs, such as some industry ETFs, theme ETFs and emerging industry ETFs. In particular, the six strategic emerging industries to which the Science and Technology Innovation Board belongs have great prospects for future development. There may be industry giants with a market value of trillions in the 50ETF of scientific and technological innovation. If you invest in such an ETF, you can share the dividend of the company's high growth, and you will definitely get good returns in the long run.

The above is an introduction about ordinary investors buying ETF funds, and I hope it will help you.