What are ETFs? ETFs are also known as partially closed open-end funds or partially open closed-end funds.

Investors can buy ETFs with cash or a portfolio of stocks, or they can buy and sell them on the secondary market.

The vast majority of ETFs track a composite or industry index.

Investors can also use the subscription and redemption mechanism for arbitrage.

That is, when the price premium of ETFs is too high, institutional investors will use the continuous offering mechanism to subscribe for ETFs at a net price lower than the market price, and then sell the ETFs in the secondary market to make a profit.

When the relative discount of ETFs is too large, institutional investors can purchase ETFs in the secondary market at a price lower than the net value. When a creation unit is reached, they can use the redemption mechanism to exchange ETFs for stocks, and then cash out the stocks to make a profit.

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What are the advantages of ETFs? 1. Compared with open-end funds, ETFs have the following advantages: (1) Increase the liquidity of the fund.

Generally, open-end funds can only be opened once a day or less (often after the securities market closes), leaving investors with few trading opportunities; while ETFs can be traded at any time throughout the day, offering the convenience of trading.

(2) Increased price volatility.

Investors in open-end funds can only subscribe or redeem based on the net value plus handling fees, and there is no possibility of price fluctuations. Although the transactions of ETFs are based on their net value, due to the existence of secondary market transactions, their prices

It fluctuates up and down with the influence of supply and demand, and investors can still obtain the price difference caused by its price fluctuations.

(3) Improve the efficiency of fund use of funds.

Open-end funds often need to retain a certain amount of cash to cope with redemptions, which objectively makes it impossible for open-end fund managers to invest all the funds, reducing the efficiency of fund use. However, when ETFs are redeemed, a stock portfolio is delivered and there is no need to retain

Cash is convenient for managers to operate.

(4) Effectively protect the interests of long-term investors.

Open-end funds need to face investor redemptions, so their investment portfolios need to be constantly adjusted. The resulting taxes and losses on some investment opportunities are borne by long-term investors who have not requested redemptions; while ETFs, even if some investors

Redemption will not have much impact on long-term investors because the redemption is for stocks.

2. Compared with closed-end funds, the advantages of ETFs are: (1) There is a greater restraint mechanism for fund managers.

Since the income of fund managers mainly comes from fund management fees, and fund management fees have an obvious positive correlation with the size of the fund, investors will continue to subscribe only if the performance of the fund is very good; otherwise, investors will continue to subscribe

Redemption on the ground, which fully absorbs the effective restraint mechanism of open-end funds on fund managers.

(2)ETFs are more transparent.

Since investors can subscribe/redempt continuously, fund managers are required to publish their net worth and investment portfolio more frequently.

(3) Effectively suppress irrational price fluctuations of funds.

Due to the existence of a continuous subscription/redemption mechanism, theoretically there will not be a large discount/premium between the net value and market price of ETFs. However, the current discount transactions of China's closed-end funds have brought great challenges to the majority of investors, especially institutional investors.

suffered a certain loss.