ETF, a transactional open-end index fund, also known as exchange-traded fund (ETF), is an open-end fund with variable fund share and listed on the exchange. Transactional open-end 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 buy 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 use a basket of shares for fund shares or use a basket of shares for fund shares.

Because the securities market transaction and the subscription and redemption mechanism exist at the same time, when there is a price difference between the ETF market price and the net value of the fund unit, investors can carry out arbitrage trading. The existence of arbitrage mechanism makes ETF avoid the common discount problem of closed-end funds. According to the different investment methods, ETFs can be divided into index funds and active management funds, and most of the ETFs abroad are index funds. At present, ETFs launched in China are also index funds. 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 fund share net value trend are basically consistent with the tracked index. Therefore, investors buying and selling an ETF is equivalent to buying and selling the index it tracks, and can get basically the same income as the index. Usually, it adopts a completely passive management mode, aiming at fitting an index, which has the characteristics of both stocks and index funds. Passive portfolio usually contains more goals than general active portfolio. The increase in the number of targets can reduce the impact of the fluctuation of a single target on the overall portfolio, and at the same time, it can reduce the fluctuation of the portfolio through the different effects of different targets on market risk.