ETF(ExchangeTraded Fund), also known as transactional open index fund, is essentially an index investment tool. By copying the basic index, it establishes a portfolio that tracks the changes of the index, and investors can trade a package of securities by buying and selling products. When the transaction price of ETF in the secondary market is lower than its net share value, that is, a discount transaction occurs, large investors can buy ETF at a low price in the secondary market, then redeem (sell at a high price) their share in the primary market, and then sell their share in the secondary market to realize arbitrage trading.
Main categories of ETFs
1. Stock ETF: The stock index is the tracking target, and the investment target is the stock listed on the exchange. The goal of investors is to closely track the corresponding stock index and control the tracking error and tracking deviation within a certain range.
2. Bond ETF: The bond index is the tracking target, and the investment target is the interest rate bonds and credit bonds of Shanghai Stock Exchange or the inter-bank bond market.
3. Commodity ETFs: ETFs that track the trend of commodities, such as gold ETFs that track the spot price of gold, mainly invest in gold spot contracts with purity higher than or including 99.95% listed on the Shanghai Gold Exchange.
4. Currency ETF: It is a money market fund that can be traded and redeemed on the market, and it is positioned as a cash management tool for on-market margin.
5. Alternative ETFs: such as active ETFs, leveraged ETFs and anti-leveraged ETFs.