The difference is that its subscription is to exchange a basket of stocks for ETF shares, and when it is redeemed, it is to exchange a basket of stocks instead of cash. This trading system enables such funds to have an arbitrage mechanism between the primary and secondary markets, which can effectively prevent similar closed-end funds from being greatly discounted. ETF is the abbreviation of exchange traded fund. Simply put, ETF is an open-end fund product, which will securitize the tracking index and trade it on the stock exchange, providing investors with opportunities to participate in the index performance. In fact, ETF is an index investment tool. By copying the basic index, it constructs portfolio securities that track the index changes, so that investors can trade a basket of securities by buying and selling a product.
ETF equals index+transaction+fund. We can further understand the connotation of ETF from three aspects: index+transaction+fund: from the perspective of investment methods, ETF is an index fund that tracks specific securities indexes; From the perspective of trading channels, ETF is a trading fund that can be traded in the secondary market of the stock exchange; From the operation mode, ETF is an open-end fund, which can be purchased and redeemed at any time. In a word, ETF has the characteristics of low cost and high transaction efficiency, which provides investors with a convenient and low-cost tool to invest in a specific market or industry index.