What is ETF ETF is the abbreviation of exchange traded fund, which is translated into "transactional open index fund" in Chinese, also known as exchange traded fund. ETF is an open-end securities investment fund product listed and traded on the exchange, and the trading procedure is exactly the same as that of stocks. The assets managed by ETF are stock portfolios. The types of stocks in this portfolio are the same as those of a specific index, such as the SSE 50 Index (3 128.807, -40.27,-1.27%, right). The number of each stock is consistent with the proportion of the constituent stocks of this index, and the trading price of ETF depends on the value of its stock portfolio. ETF's portfolio usually completely replicates the underlying index, and its net performance is highly consistent with the specific index pegged. For example, the net performance of SSE 50ETF is highly consistent with the rise and fall of SSE 50 index. ETF ETF is a mixed special fund, which overcomes the shortcomings of closed-end funds and open-end funds and combines their advantages. ETF can track specific indexes, such as SSE 50 Index; Unlike open-end funds, ETF uses a basket of index stocks to purchase and redeem fund shares; Etfs can be listed and traded on exchanges. ETF is essentially an open-end fund, which is not essentially different from the existing open-end funds. But it also has its own distinct personality in three aspects: first, it can be listed and traded on the exchange, and investors can buy and sell ETF shares directly on the exchange like trading individual stocks and closed-end funds; Second, ETF is basically an index-type open-end fund, but compared with the existing index-type open-end fund, its biggest advantage is that it is listed on the exchange and the transaction is very convenient; Third, its purchase and redemption also has its own characteristics. Investors can only subscribe or redeem ETFs with a basket of stocks corresponding to the index, but not with existing open-end funds for cash subscription and redemption. According to different investment methods, ETFs can be divided into index funds and actively managed funds. Most foreign ETFs are index funds, and the ETFs to be launched in China are also index funds, namely SSE 50ETF. According to different investment objects, ETF can be divided into stock funds and bond funds, among which stock funds are the main ones. According to different investment regions, ETFs can be divided into single country (or market) funds and regional funds, among which single country funds are the main ones. According to different investment styles, ETFs can be divided into market benchmark index funds, industry index funds and style index funds (such as growth, value, large, medium and small), among which market benchmark index funds are the main ones. Advantages of ETF 1 Diversify investment and reduce investment risks. Investors buy a fund unit's Huaxia-SSE 50ETF, which is equivalent to buying all the stocks of SSE 50 Index by weight. 2. It has the characteristics of both stock and index fund. 1) For ordinary investors, ETFs can also be split into smaller marketing unit like ordinary stocks and traded in the secondary market of the exchange. 2) If you earn the index, you will make money. Investors no longer need to study stocks and worry about stepping on mining stocks. However, because there is no short-selling mechanism in China's securities market at present, it is still a "loss when the index falls". 3. Combining the advantages of closed-end and open-end funds, ETFs can be bought and sold on the exchange in the form of small "fund units" like closed-end funds that we are familiar with; Similar to open-end funds, ETFs allow investors to continuously purchase and redeem. But when ETF is redeemed, investors get a basket of stocks, not cash; At the same time, it is required to reach a certain scale to allow subscription and redemption. 4. Low transaction cost Although the cost of ETF transaction on the exchange has not been finalized, it is estimated that it will not be higher than the cost of closed-end funds and far lower than the redemption fee of current open-end funds. 5. Provide the opportunity for ordinary investors to arbitrage on the same day. For example, SSE 50 fluctuated sharply in a trading day, with an intraday increase of more than 5%, but the market closed flat or even fell. For investors of ordinary open-end index funds, intraday gains are mostly meaningless, and the redemption price can only be calculated according to the closing price. The characteristics of ETF can help investors seize the opportunity of intraday rise. Since the exchange displays the IOPV every 15 seconds, this IOPV immediately reflects the change of the fund's net value caused by the rise and fall of the index, and the secondary market price of ETF also changes with the change of IOPV. Therefore, investors can throw ETFs in the secondary market in time when the intraday index rises, and get the benefits brought by the intraday index rise. Operation of ETF The operation of ETF includes issuance, trading, subscription/redemption, management and information disclosure. 1, the issuance and establishment of ETF in foreign countries generally adopts the form of "seed fund", that is, during the initial issuance of the fund, after the participating securities firms "scrape together" a basket of stocks, the fund is established and listed on the exchange. There are also some ETFs issued by IPO. TraHK in Hong Kong adopted this model to reduce the government's massive purchase of Hong Kong stocks during the financial crisis, which has its particularity. The specific domestic plan has not yet been finalized, but it will definitely provide one day to allow cash subscription (online and offline at the same time), and at the same time, the stock subscription method may be provided during the issuance period (a basket of 50 constituent stocks, or a single 50 constituent stocks as ETF shares, the specific plan has not yet been determined). After the issuance period, the fund began to open positions. After opening a position, determine the conversion relationship between the net unit value and the preset net unit value of the trading open-end index fund, and convert the number of fund shares. After the conversion, the trading open index fund share was formally established. 2.ETF trading fund will be listed on the exchange after its establishment, and investors can buy and sell ETF fund shares in the secondary market. 3.ETF subscription/redemption Investors can purchase and redeem ETFs with stock baskets and part of cash according to the subscription and redemption list (stock basket list+part of cash share) announced by the fund manager before the opening of each trading day. 4.ETF management At present, most of the existing ETFs in the world are index funds, aiming at tracking an index and adopting passive management. Fund managers only need to determine the portfolio distribution in a certain way, and do not actively study individual stocks and choose the timing. Generally speaking, the fund company's management of ETF includes portfolio construction, portfolio adjustment, investment performance and tracking error evaluation, information management, purchase and redemption list design, etc. 5.ETF information disclosure In addition to the disclosure of fund net value, fund portfolio announcement, interim report, annual report and other information, ETF also needs to publish the purchase and redemption list of the day through the exchange or other channels before the market opens on each trading day. In the process of trading in the secondary market, the exchange also needs to calculate and publish the IOPV (estimated fund net value) in real time for investors' reference when trading and arbitrage, so ETF has more information disclosure, which is one of the important contents of ETF operation and management. Comparison between ETF and other funds Compared with closed-end funds, ETF is characterized by being an open-end fund and its share scale can be changed. If the subscription volume is large, its scale will be large, and vice versa. After the establishment of closed-end funds, the scale will generally not change (it will only increase when it is raised), and fund holders can't ask for redemption of fund shares, but can only transfer them through secondary market transactions. Because closed-end funds do not purchase and redeem fund shares according to the net value of the day, the price and net value of closed-end funds often deviate greatly, and closed-end funds usually have large discount transactions. ETF is essentially an open-end fund, and fund holders can purchase and redeem the fund during trading hours. The existence of arbitrage mechanism makes its trading price basically consistent with its net value. Compared with the traditional open-end fund, the characteristic of ETF is that although ETF is also an open-end fund, ETF only accepts the subscription and redemption of "founding unit" scale (such as 6,543,800,000 shares), and the subscription and redemption is a basket of stocks (index stocks), which is different from the situation that ordinary open-end funds accept cash subscription and redemption. The biggest difference between the two is that ETFs are listed and traded on the exchange at the same time, and investors can buy and sell ETFs at market prices at any time during the trading hours of the exchange, and investors know the trading prices at that time; Ordinary open-end funds can only be traded over the counter through purchase and redemption, and can only be purchased and redeemed according to the net value of the fund after the stock market closes (announced the next day). Investors won't know the actual transaction price until the day after the order is issued. If the market fluctuates greatly during the trading hours of the exchange, investors can trade ETFs to reflect the latest information and market changes in real time and gain new opportunities or avoid losses. Even if the investors of traditional open-end funds make the right decision long before closing, they may eventually get an unsatisfactory closing price, thus falling into a situation where correct judgment is still useless. In terms of rate, the annual management fee of ETF is much lower than that of actively managed stock open-end funds and traditional index funds. Finally, the transparency of ETF is much higher than that of traditional open-end funds. In practice, fund managers usually publish the portfolio structure of ETFs before opening ETFs every day, while traditional funds generally publish their portfolios once a quarter. Trading open index fund (ETF) is a kind of securities investment fund product listed on the exchange, and the trading procedure is exactly the same as that of stocks. The assets managed by ETF are stock portfolios. The types of stocks in this portfolio are the same as those in a specific index, such as the SSE 50 Index, and the number of each stock is consistent with the proportion of the constituent stocks of this index. The transaction price of ETF depends on the value of its stock portfolio, that is, the "net asset value of unit fund". ETF is a special hybrid fund, which overcomes the shortcomings of closed-end funds and open-end funds and integrates their advantages. The research shows that ETF has a broad market prospect in China, which not only helps to attract the savings of insurance companies, QFII and other institutions and individuals to enter the stock market and increase the proportion of direct financing, but also enlivens the secondary market transactions and increases the depth and breadth of the market.