1, systemic risk of the underlying index

According to portfolio theory, the risk of investing in a stock includes market risk and individual enterprise risk, but the market risk brought by overall economic factors cannot be eliminated by diversification. ETF is a tool for investment index. The so-called systemic risk is the risk of market ups and downs. Once it falls, investors will face losses, which is inevitable. However, investors should have the idea that only by taking the risk of market decline properly can they have the opportunity to gain the benefits of index rise.

2, unable to surpass the index performance.

At present, in the financial market, the indexed investment method has been considered to be mature and successful. On the whole, the biggest disadvantage of this investment method that is prepared to follow the index is that ETF investment can only be close to the market during the bull market, and it is difficult to outperform the market. During the bear market, ETFs will also fall with the index. In addition, because ETF transactions need the same handling fee as stocks, if the trading is too frequent, the originally relatively low handling fee will become a relatively high handling fee.

3, tracking error risk

The main task of ETF issuer is to control the tracking error between fund and index. It is precisely because the fund manager aims at minimizing the tracking error that short-,medium-and long-term investors can get almost the same investment return as the index by using ETF, or hedge investors can avoid the impact of market risks by using short ETF. In addition, the goal of minimizing tracking error also ensures that investors will not lose profits because of the sudden increase or decrease of tracking error during market activities.

4. You can't change your portfolio at will.

In order to keep up with the trend of the index, ETF's portfolio will only be adjusted when the index itself changes. Unlike other active funds, ETF can't change its portfolio because of poor performance of certain industries, nor can it overweight because it is particularly optimistic about certain industries.

5. Unable to enjoy the power of direct shareholders.

As ETF belongs to the investment form of fund, it is the beneficiary certificate of investment through ETF issuer, even if its trading method is completely consistent with that of stock, ETF investors cannot be regarded as stock investors. Generally speaking, the rights of shareholders holding shares will be exercised by ETF issuers. For example, the rights issue will be directly reflected in the net value of ETF, and the participation in the shareholders' meeting is generally executed by the fund issuer.

Tips:

1. The above information is for reference only, and no suggestions are made;

2. There are risks in entering the market, so investment needs to be cautious.

Reply time: 202 1-07- 13. Please refer to the latest business changes announced by Ping An Bank in official website.

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