Learn some financial knowledge every day

Learn a little financial knowledge every day

ETF

ETF is a transactional open-end index fund, also commonly known as exchange-traded fund (ETF for short), and it is an open-end fund with variable fund share.

Transactional open index fund is a special type of open-end fund, which combines the operating characteristics of closed-end fund and open-end fund. Investors can purchase or redeem fund shares from fund management companies, and at the same time, they can buy and sell ETF shares in the secondary market at the market price like closed-end funds. However, the purchase and redemption must exchange a basket of stocks for fund shares or a basket of stocks for fund shares. Because there are both secondary market transactions and subscription and redemption mechanisms, investors can carry out arbitrage transactions when there is a difference between the ETF market price and the net value of the fund unit. The existence of arbitrage mechanism makes ETF avoid the common discount problem of closed-end funds.

according to different investment methods, ETFs can be divided into index funds and actively managed funds, and most ETFs abroad are index funds. ETF launched in China is also an index fund. ETF index fund represents the ownership of a basket of stocks, which refers to the index fund that is traded on the stock exchange like stocks, and its trading price and net fund share trend are basically consistent with the tracked index. Therefore, investors buy and sell an ETF, which is equivalent to buying and selling the index it tracks, and can obtain basically the same income as the index. Usually, a completely passive management method is adopted to fit an index, which has the characteristics of both stocks and index funds.

Precautions for purchasing ETF funds

First, we must look at the premium rate, that is, the market price/net value. If there is leverage, such as GEM B\ SME B, the premium rate can be around 15%. Without leverage, the premium rate should generally not exceed 5%. If it is too large, it means that the tracking error of the fund company is too large or for other reasons. In short, it is not normal.

second, it depends on the off-market share, and there are off-market shares at the same time, which can be converted to each other. Because there are arbitrage opportunities, the deviation between the price and the net value is generally not too great.