What is an ETF fund? What are the advantages of ETF funds?

When investing in financial management, we often hear people talk about ETF funds, so what is ETF funds? What knowledge do we need to know about ETF funds? Now let's learn the relevant knowledge!

ETF fund definition:

Transactional open-end index fund, also known as exchange-traded fund (ETF), is an open-end fund listed and traded on the exchange, with variable fund share.

Exchange-traded fund (ETF) is a collective investment tool, and its investors can buy and sell ETF shares at the market price all day. Investors can buy and sell ETF funds through brokers or brokerage accounts just like publicly trading company stocks.

ETF fund was first born in America. Most ETF funds that invest in securities are open investment companies like MF, which are governed by the same laws and regulations.

ETFs investing in commodities, currencies and futures are subject to different regulatory requirements due to their different structures.

Most of the early ETF funds tracked the traditional index weighted by market value, while the innovative index ETF launched in recent years tracked the benchmark based on a series of fundamental factors such as index compilation methods and market value weight.

At present, ETF securities funds operating in China are all invested in an index.

Fund management companies will first select a stock index and track this target index to set up ETF funds. For example, CSI 500ETF Fund and CSI 300ETF Fund are ETF funds that track CSI 500 Index and CSI 300 Index respectively.

The "other index" ETF fund, which is also widely used abroad, tracks the index based on certain factors, and this index is an index that screens potential securities according to various attributes such as value, growth and dividend, and then gives the selected securities equal weight or market value weight. Other customized indexes also adopt methods including screening, selecting and weighting securities portfolio, so as to minimize portfolio fluctuation and maximize diversification, and make it relevant to the market to a certain extent.

Let's go back to the ETF fund in China. These ETF funds based on index and tracking index can track their target index in various ways, that is, their assets are invested in all the stocks in the target index at a ratio close to 65,438+000% (in order to meet the daily redemption demand, no more than 5% cash is usually reserved) to simulate the performance of this target index.

ETF index funds can also simplify their index portfolio by optimizing the representative securities samples in the investment target index. For example, ETF funds tracking CSI 1000 index may not buy enough 1000 constituent stocks, but simplify and optimize the portfolio through certain algorithms and models.

Benefits of ETF funds:

The first advantage: trading is more flexible.

Etfs support T+0.

In other words, we can buy an ETF on the same day, or we can buy and sell it on the same day. And it can be traded many times a day.

The second benefit: ETF funds are more transparent.

On the one hand, ETF funds are mostly index funds, and the stock selection rules are open and transparent; On the other hand, ETF funds need to use stocks for subscription, so they will generally announce the types and proportions of stocks currently held.

For ordinary investors, ETF funds are open and transparent, avoiding risks such as rat warehouses and shady transactions.

The third benefit: ETF fund rate is low.

Regardless of the management rate or transaction rate, ETF funds are far lower than ordinary equity funds.

Some American ETF funds can even achieve a management rate below 0. 1%.

The domestic ETF management rate is generally 0.5% or even lower. It is the lowest among stock funds. It's really good and cheap.