1.ETF is a transactional open index fund.
1. Trading open-end index fund, commonly known as exchange-traded fund (ETF), is an open-end fund with variable fund shares 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. At the same time, ETF shares can be bought and sold at the market price in the secondary market like closed-end funds. However, the purchase and redemption must be exchanged for a basket of shares or a basket of shares.
2. Because there are both secondary market transactions and subscription and redemption mechanisms, investors can carry out arbitrage transactions when there is a price difference between the ETF market price and the fund unit net value. The existence of arbitrage mechanism makes ETF avoid the common discount problem of closed-end funds.
Second, the characteristics of ETF funds
1. Trading open-end index funds are essentially index funds, but different from traditional index funds, trading open-end index funds can be listed on exchanges, and investors can buy and sell a fund representing the "underlying index" like buying and selling stocks. Transactional open-end index fund is a special open-end fund, which not only absorbs the advantages that closed-end funds can trade in real time on the same day, but also allows investors to buy and sell the shares of transactional open-end index funds in the secondary market like closed-end funds or stocks. It also has the advantage that open-end funds can purchase and redeem freely. Investors can buy or redeem the shares of transactional open-end index funds from fund management companies just like buying and selling open-end funds.
2. The subscription and redemption of transactional open index funds must be exchanged for a basket of stocks (or a small amount of cash) or a basket of stocks (or a small amount of cash). Due to the existence of this special physical purchase and redemption mechanism, investors can carry out arbitrage trading when there is a difference between the transaction price in the secondary market of transactional open index funds and the net value of fund shares. In addition, the market price of trading open-end index funds is basically the same as its unit net value, and there will be no common discount problem of closed-end funds.