What is the ultimate mission of ETF? Traded open-end index funds, also commonly known as Exchange Traded Funds ("ETF" for short), are an open-end fund listed and traded on an exchange with variable fund shares.

fund.

Exchange-traded open-end index funds are a special type of open-end funds. They combine the operating characteristics of closed-end funds and open-end funds. Investors can not only subscribe for or redeem fund shares from the fund management company, but also

Closed-end funds also buy and sell ETF shares in the secondary market at market prices. However, subscriptions and redemptions must be made in exchange for a basket of stocks for fund shares or for fund shares to be exchanged for a basket of stocks.

Due to the simultaneous existence of securities market transactions and subscription and redemption mechanisms, investors can conduct arbitrage transactions when there is a difference between the ETF market price and the net value of the fund unit.

The existence of the arbitrage mechanism enables ETFs to avoid the discount problem common to closed-end funds.

According to different investment methods: ETFs can be divided into index funds and actively managed funds. The vast majority of foreign ETFs are index funds.

The ETFs currently launched in China are also index funds.

ETF index funds represent the ownership of a basket of stocks and refer to index funds that are traded on the stock exchange like stocks. Their trading prices and trends in the net value of fund shares are basically consistent with the index being tracked.

Therefore, when investors buy and sell an ETF, they are equivalent to buying and selling the index it tracks, and they can obtain returns that are basically consistent with the index.

Usually a completely passive management method is adopted, with the goal of fitting a certain index, and has the characteristics of both stocks and index funds.

In recent years, the number of ETF products has been growing and the types have been enriched. However, in the process of application trading, publicity and promotion, and customer development, ETFs are often limited to being associated with arbitrage trading, high-frequency trading, etc., and even many investors mistakenly

It is believed that speculation and short-term trading are all the applications of ETFs, which leads to ordinary investors not knowing much about ETFs or being intimidated by them.

ETF arbitrage, high-frequency trading, etc. are trading strategies and application methods derived from ETFs. ETFs provide tools and platforms for such transactions, and their existence is also one of the factors that ensure that ETFs can be used efficiently and conveniently by investors.

However, these facts should not be the core function of ETF existence.

It needs to be emphasized that the core function of ETFs should still provide investors with excellent tools for medium and long-term asset allocation.

It is not advisable to abandon the basics and pursue the weak.

Asset allocation is an art. Research shows that in the long term, about 90% of investment returns come from successful asset allocation.

The core essence of asset allocation is to diversify investments among different asset classes that have low or negative correlation.

For example, investors can use stocks and bonds to build an allocation portfolio; in index funds, they can choose products with low correlation—such as E Fund CSI 300 ETF (510310) and GEM ETF (159915)—to build an allocation portfolio.

In the process of building a specific portfolio, there are nothing more than two tasks to be completed: one is to study how to select and combine different types of assets according to a certain proportion; the other is to select appropriate investment tools and channels to achieve and complete the portfolio goals.

Just like finishing a painting, you must first decide what you want to paint, and then decide what brush to choose and how to match the available paints to achieve the best effect.

How to choose a tool to build a portfolio? First, it can cover and accurately point to different asset classes planned to be allocated; second, it has low investment fees and can complete the initial construction and daily rebalancing with low transaction costs.

ETFs that closely track the target index, have low management fees and transaction costs, and have an open and transparent portfolio are very suitable "brushes" and "paints" for constructing asset allocation portfolios efficiently, conveniently, and accurately.

The ETFs currently available in the market can cover different asset classes such as stocks, bonds, and commodities, different national and regional markets in the United States and Hong Kong, different industries such as medicine and energy, and different styles of large-cap, small-cap, value, and growth. In the future

Products will be more abundant.

Whether it is strategic asset allocation or tactical asset allocation, ordinary investors can use ETF combinations to easily outline their own "paintings", diversify risks, and increase returns.

This is the ultimate task and mission of ETFs.