Differences and relations between ETF and LOF
ETF refers to a fund that can be traded on an exchange. ETF usually adopts a completely passive management mode, aiming at fitting an index. It also provides investors with two trading methods: exchange trading, subscription and redemption. On the one hand, like closed-end funds, investors can buy and sell ETFs on exchanges, and they can sell short and trade margins like stocks. On the other hand, like open-end funds, investors can purchase and redeem ETFs, but when purchasing and redeeming, ETFs exchange fund shares and "a basket" of stocks with investors. ETF has the characteristics of tax advantage, cost advantage and flexible transaction.
LOF is an innovation of open-end fund trading mode, and its more realistic significance lies in: On the one hand, LOF provides technical means for "closed to open". For closed-end funds, LOF is a solution that inherits the characteristics of closed-end funds and increases the exit mode of investors. For closed-end funds, LOF is not only a reasonable change of fund trading mode, but also a reasonable inheritance of open-end funds to closed-end funds. On the other hand, LOF's on-site trading reduces the redemption pressure. In addition, LOF has increased the sales channels of fund companies and eased the sales bottleneck of banks.
LOF is similar to ETF, which has both over-the-counter trading and on-site trading, and at the same time provides investors with the possibility of arbitrage. In addition, LOF is different from the current open-end fund, which increases the trading flexibility brought by on-site trading.
The differences between the two are as follows: first, ETF is essentially an index-type open-end fund and a passively managed fund, while LOF is an ordinary open-end fund that increases the trading mode of exchanges, which may be an index-type fund or an actively managed fund; Secondly, when purchasing and redeeming, ETF exchanges fund shares and "a basket" of stocks with investors, while LOF exchanges cash with investors; Thirdly, in the primary market, that is, when purchasing and redeeming, ETF investors are generally large investors, such as institutional investors and large-scale individual investors, while LOF is not restricted; Finally, in the secondary market, ETF provides a net quotation of funds every 15 seconds, while LOF provides a net quotation of funds every day.
How to invest in ETF and LOF
For LOF, investors' investment behavior may be relatively simple. If you are optimistic about related open-end funds, such as an open-end fund of a fund company, then you can buy it like a closed-end fund or when it is issued. Secondly, some radical investors can also do some short-term operations. Of course, this must be done with sufficient confidence in the fund's net value, because after all, LOF publishes its net value once a day.
For ETF, investors should make some choices, such as choosing products and timing. First, choose the ETF products that suit you. All kinds of information show that there will be a series of exchange-traded funds in the future. The Shanghai Stock Exchange said that with the launch of SSE 50ETF products, a series of ETF products such as SSE 180ETF, high dividend stock index ETF, large-cap stock index ETF and industry ETF will be launched in the future. Then, how investors choose the right variety among many ETFs is a problem worth thinking about. The author concludes that one is to understand, and the other is to think that its index will rise for a long time; Third, the index is suitable for your investment style. For example, risk-averse investors are suitable for buying small-cap ETFs, while risk-averse investors are suitable for buying blue-chip ETFs. Second, choose the timing. From the experience of foreign countries, it is best to intervene when the index is adjusted by 20%, and chasing high to buy ETF will be the same as chasing high to buy stocks. At present, the SSE 50 index has recently been adjusted from the highest point to the lowest point, with a maximum of 22%, which is theoretically a buying opportunity. Of course, this is only an empirical choice; On the contrary, if you think that the SSE 50 index is unlikely to rise in the future and its future income may not be comparable to the savings income, then obviously you should not invest in the SSE 50ETF.
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