ETF (exchange traded fund)

ETF fund

Investors can buy ETFs in two ways: after the securities market closes, they can buy from fund managers according to the net value of the fund on that day (just like ordinary open-ended funds); You can also buy directly from other investors in the securities market, and the purchase price is determined by both the buyer and the seller, which is often different from the net value of the fund at that time (like ordinary closed-end funds). ETF is considered as one of the greatest financial innovations in the past decade, which has the characteristics of open-end funds being able to purchase and redeem and closed-end funds being able to trade. Up to now, almost all ETFs are index funds. The earliest ETF was the introduction of the world's first ETF-Index Participation Share (TIPS) by the Toronto Stock Exchange (TSE) in 199. TIPs)1993, the first ETF in the United States-Standard & Poor's Depositary Receipts (SPDRs) was born. Since then, ETFs for Dow Jones, Nasdaq, Russell, Wilshire and other indexes have come out one after another. In recent years, special ETFs for specific industries, countries or regions have been born. Most ETFs are equity funds, but ETFs based on fixed-income securities, commodities and currencies are also developing. For small and medium-sized investors, ETF is attractive because of its low transaction and management costs, stable shareholding portfolio, scattered risks and high liquidity. Some people think that the steady development of ETF will lead to the decline of traditional actively managed stock funds.

ETF-linked fund

Because ETF funds must be purchased through securities companies, some fund companies have developed ETF-linked funds in order to broaden the sales channels of ETFs. ETF-linked funds are essentially a kind of open-end funds, and their subscription, subscription and redemption methods and channels are exactly the same as those of ordinary open-end funds. Their characteristics are that the investment targets of ordinary open-end funds and ETFs are stocks, fixed income and other assets. The vast majority of investment targets of ETF-linked funds are their target ETF funds (generally, they invest in the target ETF funds with no less than 9% positions), which are also called "shadow funds" and "replication funds".

[ Edit this paragraph ]ETF(Escape The Fate)

Rock band Escape the Fate and The Killers and Panic from the same city! At The Disco is different from "soft rock". They follow the Post-Hardcore route similar to Underoath, which is also Ronnie Radke's good style. After a summer dormancy, they finally released their debut album Dying Is Your Latest Fashion, which entered the list for two weeks and climbed to the 19th place on the billboard Top Independent Albums list.

ETF (European Training Foundation)

EU Training Fund, an institution of the European Union.

three advantages of ETF

ETF has risen rapidly in the international market because of its innovations in product design, and it has the following advantages. ETF adopts indexed investment strategy. The deviation between ETF and the underlying index is small, and the investment in ETF can obtain similar income to the underlying index; Investors can invest in the underlying index at a lower cost, making it as simple as investing in a stock. Etfs can be listed and traded. ETF, like a stock, keeps trading during the trading time, and investors can buy and sell according to the real-time transaction price, so as to better grasp the transaction price. Etfs are cheap. By copying the index and the physical redemption mechanism, ETF greatly saves operating expenses such as research expenses and transaction expenses. ETF management fees and custody fees are not only far lower than those of actively managed stock funds, but also lower than those of traditional index funds that track the same index. The transaction cost of ETF secondary market is similar to that of stocks, which greatly reduces the transaction cost of investors. ETF is a brand-new investment tool. In the investment field, ETF is no longer just an investment product, but an increasingly instrumental product. Investors can invest in ETF for stock reinvestment, asset allocation, long-term investment, arbitrage trading, timing and short-term investment.

differences and connections between lof and etf

listed open-end fund (lof) and exchange traded fund (ETF) are concepts that are easily confused. Because they all have the characteristics that open-end funds can be purchased, redeemed and their shares can be traded on the market. In fact, there are essential differences between the two. ETF refers to a fund that can be traded on an exchange. ETF usually adopts a completely passive management method, aiming at fitting an index. It provides investors with two trading methods: exchange trading, subscription and redemption. On the one hand, like closed-end funds, investors can buy and sell ETFs on the exchange, and they can sell short and trade margin like stocks (if the market allows stock trading in these two forms); On the other hand, like open-end funds, investors can purchase and redeem ETFs, but when purchasing and redeeming, ETFs exchange fund shares and "a basket" of stocks with investors. ETF has the characteristics of tax advantage, cost advantage and flexible transaction. LOF is an innovation in the trading mode of open-end funds, and its more practical significance lies in: on the one hand, LOF provides technical means for "closing to opening". For closed-end funds, LOF is a solution that inherits the characteristics of closed-end funds and increases investors' withdrawal methods. For closed-end funds, LOF is not only a reasonable transformation of fund trading methods, but also a reasonable inheritance of open-end funds to closed-end funds. On the other hand, LOF's on-site trading reduces the redemption pressure. In addition, LOF has increased sales channels for fund companies and eased the sales bottleneck of banks. LOF is similar to ETF in that it has both off-exchange and on-exchange trading methods, which at the same time provide investors with the possibility of arbitrage. In addition, LOF is different from the current open-end funds in that it increases the trading flexibility brought by on-site trading. The differences between the two are as follows: first, ETF is essentially an index-type open-end fund, which is a passive management fund, while LOF is an ordinary open-end fund that increases the trading mode of the exchange, which may be an index fund or an active management fund; Secondly, when purchasing and redeeming, ETF exchanges fund shares and "a basket" of stocks with investors, while LOF exchanges cash with investors; Thirdly, in the primary market, that is, when purchasing and redeeming, ETF investors are generally large investors, such as institutional investors and large-scale individual investors, while LOF is not limited; Finally, in the secondary market, ETF provides a fund net quotation every 15 seconds, while LOF provides a fund net quotation every day.

advantages and disadvantages of ETF and arbitrage opportunities

firstly, ETF overcomes the defects of closed-end fund discount trading. Closed-end fund discount transaction is the same feature of global financial market, and it is also a phenomenon that classical financial theory can not explain well so far, which is called "the mystery of closed-end fund discount". This phenomenon is particularly prominent in China. At present, the average discount rate of 54 closed-end funds listed on the Shanghai and Shenzhen stock exchanges in the secondary market is close to more than 3% relative to their unit net value. Due to the discount trading of closed-end funds, the development of global closed-end funds is shrinking, and some of its original advantages are also covered up. ETF funds can be traded in the secondary market, and they can also directly purchase and redeem a basket of stocks from fund managers, which makes it possible for investors to arbitrage in the primary and secondary markets. It is the existence of this arbitrage mechanism that inhibits the deviation between the secondary market price and the net value of the fund, so that the transaction price in the secondary market is basically consistent with the net value of the fund. Secondly, compared with open-end funds, ETF funds have the characteristics of low transaction cost, convenient transaction and high transaction efficiency. At present, investors invest in open-end funds by purchasing and redeeming funds from fund management companies through banks, brokers and other consignment agencies. Generally, the transaction fee of stock-based open-end funds is above 1%, and the redemption money will not arrive until 3 days after redemption. Buying different funds requires going to different fund companies or banks and other agencies, and the transaction convenience is not too high. However, if investors invest in ETF funds, they can trade directly through the exchange according to the public quotation, just like stocks and closed-end funds, and the funds will arrive the next day. Finally, ETF generally adopts a completely passive indexation investment strategy to track and fit a representative underlying index, so the management fee is very low and the operation transparency is very high, which allows investors to invest in the component stocks in a basket of underlying indexes at a lower cost, so as to fully diversify their investments and effectively avoid the unsystematic risks of stock investment. It is precisely because of these advantages that ETF has become the fastest growing financial product in the world in the past 1 years: American Stock Exchange (AMEX) launched Standard & Poor's Index Depositary Receipt (SPDRs) on January 29th, 1993. Since then, ETF products have developed rapidly in the United States and even around the world. As of June 3, 24, there were 34 ETFs in the world, with assets of US$ 246.4 billion. At present, the SSE 5ETF designed in China is an open index fund that tracks the SSE 5 Index and is listed on the exchange. It is managed by Huaxia Fund Management Company and adopts a completely passive management mode to fit the SSE 5 Index. The design of SSE 5ETF trading system also provides opportunities for investors who meet certain trading conditions to participate in arbitrage trading. At the same time, it is worth noting that SSE 5ETF has also realized the T+ transaction of SSE 5 Index under the existing institutional framework. 1. SSE 5 Index constructs the value basis of SSE 5ETF. SSE 5ETF is essentially a completely passive index fund, and its investment income ultimately comes from the growth of SSE 5 Index. From our research, the constituent stocks of SSE 5 Index have the characteristics of "blue chips". From the perspective of industry representativeness, scale and liquidity, it also represents the international mainstream market value orientation. From the perspective of investment value, the advantages of SSE 5 Index are very obvious. For investors, SSE 5ETF provides a very convenient way to buy and sell SSE 5 index. Although the number of sample companies in SSE 5 is less than 3.67% of all 1365 listed companies (September 3, 24, all A-share companies), they account for 31.43% of the total listed net assets and 47.59% of the total assets. It also created 45.64% net profit of the whole listed company and 45.8% net profit after deducting non-recurring gains and losses. Judging from the average profit rate, main business income, average P/E ratio, return on net assets and other indicators, the constituent stocks of SSE 5 Index are undoubtedly the best listed companies in Shanghai. Most of the companies selected in SSE 5 are representative leading enterprises in the industry, including leading enterprises in petrochemical, banking, shipping, steel, electric power, telecommunications, automobiles, pharmaceuticals, household appliances and other industries, such as China Petrochemical, China Merchants Bank, Shanghai Pudong Development Bank, Changjiang Electric Power, Shanghai Airport, China Shipping Development, baoshan iron & steel, WISCO, Huaneng International, China Unicom, Shanghai Automobile, Huabei Pharmaceutical, Sichuan Changhong and other large enterprises. The selection of sample stocks has fully considered industry representativeness, market size, trading activity and operating performance. For investors, SSE 5ETF provides a very convenient way to buy and sell SSE 5 index. Investors can freely enter and exit the ETF secondary market, just like buying and selling stocks. Investors will no longer have the situation of "earning the index and accompanying the money". For investors, they can adopt the long-term investment strategy of buy and hold, or they can operate the band to obtain the spread income. Second, arbitrage trading-the important vitality of SSE 5ETF arbitrage trading is one of the important manifestations of ETF vitality. The continuous subscription and redemption mechanism of SSE 5ETF provides a way for investors with a certain asset scale to participate in arbitrage. The basic principle of arbitrage is shown in the attached table. When the ETF trades at a premium, that is, when the secondary market price is higher than its net value, the primary market participants of the ETF can purchase the SSE 5ETF in the primary market by buying the same combination as the basket of shares announced by Huaxia Fund on the same day, and then sell the corresponding share of the SSE 5ETF on the exchange. In this way, if the transaction cost is not considered, the cost for investors to buy shares in the stock market should be equal to the unit net value of ETF. Since ETF is traded at a premium in the secondary market, investors can get the difference. However, when ETF trades at a discount, that is, when the secondary market price is lower than its net value, the arbitrage trader can obtain arbitrage income through the opposite operation. That is, participants in the primary market of ETFs can buy SSE 5ETF in the secondary market, redeem the same number of ETFs in the primary market (and get the portfolio stocks representing ETFs), and sell the redeemed stocks in the secondary market. If transaction costs and liquidity costs are not considered, then the value of the redeemed shares sold by investors in the secondary market should be equal to their net fund value, and since ETFs are traded at a discount, arbitrageurs can profit from them. Of course, since the subscription and redemption of ETFs must reach a certain scale, for example, the SSE 5ETF requires more than 1 million shares, ordinary investors with smaller funds cannot participate in the arbitrage trading of ETFs. However, investors with a relatively large amount of funds can fully participate. III. T+—— It is worth noting that the SSE 5ETF has achieved T+ trading under the framework of the existing trading system. According to Article 22 of the Detailed Rules for the Implementation of Trading Open Index Fund Business of Shanghai Stock Exchange, the ETF fund shares bought on the same day cannot be sold, but can be redeemed; ETF fund shares purchased on the same day can be sold, but cannot be redeemed; Stocks bought by investors on the same day may not be sold, but can be used to purchase ETF fund shares; Shares obtained by investors from redeeming fund shares on the same day may be sold, but they may not be used to purchase ETF fund shares. Therefore, investors can realize T+ trading on the SSE 5 Index on the same day. In this sense, SSE 5ETF has achieved a major breakthrough in China's existing trading system. In addition to the uniqueness of ETF's operating mechanism compared with other fund products, the target of ETF products or the characteristics of ETF as an index fund are the fundamental reasons for ETF's great development in the past ten years. Therefore, whether institutional investors or ordinary investors