Let me answer this question.

The full name of ETF funds is Exchange Traded Funds ('ETF'), which has the advantages of low cost and convenient transactions. At present, ETF is one of the lowest-cost funds. Generally, ETF funds have a management fee of 0.5% and a custody fee of 0.1%, while active funds generally have a management fee of 1.5% + 0.25%. In comparison, ETFs are only 1/3 of active funds. Moreover, ETFs When trading on a brokerage exchange, the commission is generally 2.5% per thousand (you may get 10,000% if you catch up with brokerage promotions), which is even cheaper than over-the-counter funds with a 10% discount and 1.5% per thousand.

Because ETF redemptions are traded in the form of a basket of stocks, there is no need to set aside funds to deal with redemptions, and the tracking index is more accurate than OTC funds.

ETF funds are traded at T+0 on the market at all times and have better liquidity. ETF fund time-sharing chart

Nowadays, ETF funds are becoming more and more popular among investors. However, in addition to formulating investment strategies, investing in ETFs does not involve directly trading with a brokerage firm. There are still things to pay attention to.

When you open the operation page of a brokerage, you will see a time-sharing chart that looks like an electrocardiogram. Many people turn a blind eye to it, and it is estimated that most people cannot understand it. Qingshu is here to popularize the science today.

The red line represents the actual net asset value of all stocks corresponding to the ETF during this period

The white line represents the trading price of the ETF in the secondary market.

The yellow line is the average price of the day.

If your securities company’s time-sharing line does not have a red line, it is recommended to try another securities company’s trading software, such as Oriental Fortune.

Everyone wants to get the best value for their money, and it is certainly more cost-effective to trade when the price is lower than the value. When buying ETFs, of course choose to buy when the white line is below the red line and the trading price is lower than the actual stock net asset value.

To popularize science, if the white line is at the bottom and the red line is at the top, the transaction price is lower than the actual value, which is called a discount. If the red line is below and the white line is above, the transaction price is higher than the actual value, which is called a premium.

Under normal circumstances, the price fluctuates around the average price. It would be more perfect if the white line is purchased below the yellow line. ETF arbitrage

Because ETFs have an arbitrage mechanism, the transaction price is not much different from the actual value of the stock. But it would be very dangerous to buy a fund when there is a high premium.

For example, Boshi S&P 500 ETF (513500) stopped subscribing at the beginning of 2016 due to insufficient foreign exchange purchase quota. From July 2016 to the end of December, the S&P 500 ETF rose as high as 43.19%. During the same period, although the US S&P 500 Index also hit new highs repeatedly, it actually only rose 7.86%. On December 21, the closing price was 26.72% higher than the reference net value.

Boshi announced that the S&P 500 ETF will open for subscription on the 28th. At this time, a large number of arbitrage funds will first subscribe based on the net value and then sell based on the transaction price. The high premium was wiped out at once, causing fund trading prices to plummet.

Novices who don’t care about discounts and premiums will be trampled to pieces. It’s too miserable.

Hope it will be adopted. If you have any questions, please follow me or send a private message.