1, the purchase and redemption methods are different.
ETF has a unique physical subscription and redemption mechanism. ETF subscription means that investors exchange physical objects (cash for general funds) for a fixed number of ETF fund shares of fund management companies; Redemption is to exchange a fixed number of ETF fund shares from the fund management company for a basket of index stocks (not cash).
2. Different trading places
Investors in general funds directly trade with the issuing company of the fund, basically through the OTC market; On the other hand, ETFs can be traded on the stock exchange like stocks, and their prices change at any time during the trading period, so investors can place orders during the trading period and trade through the on-site market.
3. Different transaction costs
Generally speaking, the management fee that ordinary funds need to pay each year is much higher than that of ETF funds; In addition, the subscription and redemption of most ordinary funds require a certain fee, while there is no subscription fee and redemption fee for ETF funds traded in the market. The transaction fee is charged according to the trading commission of the securities company, and there is no stamp duty.
4. Different ways of fund management.
The way of ETF management is "passive": ETF managers will not actively choose the investment target, but try to copy the index to let investors earn the corresponding rate of return. However, the management mode of ordinary funds is mostly "active": its fund managers need to constantly optimize their investment strategies in order to pursue higher investment returns.