The basic trading model of ETFs. Trading open-end index funds, also commonly known as Exchange Traded Funds ("ETF" for short), are an open-end fund that is listed and traded on an exchange and has variable fund shares.

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Exchange-traded open-end index funds are a special type of open-end funds. They combine the operating characteristics of closed-end funds and open-end funds. Investors can not only subscribe for or redeem fund shares from the fund management company, but also

Closed-end funds also buy and sell ETF shares in the secondary market at market prices. However, subscriptions and redemptions must be made in exchange for a basket of stocks for fund shares or for fund shares to be exchanged for a basket of stocks.

Due to the simultaneous existence of securities market transactions and subscription and redemption mechanisms, investors can conduct arbitrage transactions when there is a difference between the ETF market price and the net value of the fund unit.

The existence of the arbitrage mechanism enables ETFs to avoid the discount problem common to closed-end funds.

According to different investment methods: ETFs can be divided into index funds and actively managed funds. The vast majority of foreign ETFs are index funds.

The ETFs currently launched in China are also index funds.

ETF index funds represent the ownership of a basket of stocks and refer to index funds that are traded on the stock exchange like stocks. Their trading prices and trends in the net value of fund shares are basically consistent with the index being tracked.

Therefore, when investors buy and sell an ETF, they are equivalent to buying and selling the index it tracks, and they can obtain returns that are basically consistent with the index.

Usually a completely passive management method is adopted, with the goal of fitting a certain index, and has the characteristics of both stocks and index funds.

According to the trading method, the ETF trading market is divided into primary market and secondary market.

Specifically, before the ETF product is launched, investors can first subscribe during the initial fundraising period; after the product is launched, investors can obtain fund shares by subscribing for a basket of portfolio securities (or with a small amount of cash) in the primary market, or with a small amount of cash.

Fund shares are redeemed for a basket of stocks (or with a small amount of cash); at the same time, investors can also buy and sell ETF shares on the secondary market like stocks.

The ETF primary market application and redemption process is different from the application and redemption mechanism of ordinary open-end funds. Ordinary open-end funds generally adopt the cash application and redemption method, while ETFs generally require investors to use a basket of stocks or cash to exchange for ETF shares according to the net asset value of the fund.

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In addition, ETF transactions in the primary market are subject to minimum purchase and redemption unit restrictions, and the minimum purchase and redemption unit may be different for each ETF.

For example, the minimum subscription and redemption unit for ChinaAMC SSE 50 ETF is 1 million units, and the minimum unit for Huabao Xingye SSE 180 Value ETF is 500,000 units.

Since the minimum unit amount for ETF subscription and redemption is relatively large, generally only institutional investors and individual investors with large asset sizes can participate in the subscription and redemption of ETF primary markets.

The most convenient way for ordinary investors to participate in ETF trading is to buy and sell ETF shares in the secondary market, which is as simple as buying and selling stocks.

As long as investors open a stock account or fund account through a securities company, they can submit orders through the securities company's telephone commission or online trading system to buy and sell ETF shares at market prices.

The commission for ETF trading is no higher than that of stocks, and no stamp duty is paid. The cost borne by investors is lower than that of stocks.

Investors buying and selling an ETF are equivalent to buying and selling the index it tracks, and can steadily obtain profits from the increase in the underlying index.

For example, the Shanghai Composite Index has continued to rise recently, with an increase of more than 15% compared with the beginning of the year.

If investors choose stocks carelessly, they will have to face the embarrassment of "only making money on the index but not making money".

However, if investors have a clear judgment on the trend but are uncertain about individual stock selection, they can share the stable income from the index's rise by purchasing an ETF tracking the Shanghai Composite Index.