Purchase and redemption must use a basket of stocks (or a small amount of cash) for fund shares or a basket of stocks (or a small amount of cash). Because there are both secondary market transactions and subscription and redemption mechanisms, investors can carry out arbitrage transactions when there is a difference between the transaction price in the ETF secondary market and the net value of the fund unit.

The biggest advantage of ETF fund is to avoid non-systematic risks. Its price trend is based on macroeconomic fundamentals, and the possibility of price manipulation is almost zero. However, there are many and complicated factors to consider when investing in a company's stock. It is difficult for ordinary investors to comprehensively analyze the company's value, and it is also difficult to fully understand the company's stock price risk. Technical analysis is more effective for trading decisions of ETF funds.

For small and medium-sized retail investors, its advantages can be summarized as the following three points:

First, investors only need to judge the rise and fall of the index when buying and selling ETFs, without worrying about choosing individual stocks;

Second, buy and sell ETFs in the secondary market, one hand 100, and small funds can also participate, without investing a lot of money;

Third, it can realize diversified investment at a very low cost and reduce the risk of individual stocks. ETF 100 shares, investors only need 100 yuan to own a basket of stocks. In contrast, if investors want to diversify their risks, suppose they buy 1 hand 17 yuan of the five largest stocks in the SSE 50 Index (China Petrochemical, Huaneng International, baoshan iron & steel, China Unicom and Changjiang Power) and pay 33 17 yuan according to the closing price on July 9, 2004.

Therefore, passive investment in ETF funds (buy and hold) often gets higher expected annualized returns than investment in individual stocks, while active investment in ETF funds often gets more expected annualized returns.

For passive investment ETF funds, it is really "survival and death with the national economy". In the A-share market, I personally think that ETF50 and dividend ETF are more suitable for this investment method.

From the perspective of retail investors, it seems difficult to run out of the law of "one win, two draws and seven losses" when investing in the stock market. However, the expected annualized rate of return of all funds in the world can outperform its underlying index for 10 years. Funds that can outperform the index are very rare, and it may be more difficult to choose stocks. But if you can implement passive investment, you can become a "win-win" member.