1. What is an ETF fund?
ETF fund, the full name of ExchangeTradedFund, is an open-end fund registered in the stock exchange. It simulates a specific index, such as the Shanghai Composite Index or the Nasdaq Index, which is allocated according to the constituent stocks of the index and offered to investors for trading.
Second, the advantages of ETF funds
1, diversification index selection
The investment targets of ETF funds can be a series of stock indexes and bond indexes, which can help investors diversify their investments to some extent.
2. Flexible and fast trading characteristics
ETF funds can be bought and sold on the exchange like stocks, with fast trading speed and accurate and transparent price, which is different from open-end funds that need to entrust securities companies.
3. Low cost
Compared with some active funds, ETF funds have relatively low management expenses, sales expenses, dividend reinvestment and other related expenses, which can reduce the risk of investors. At the same time, ETF funds also have high liquidity, which is convenient for investors to purchase and redeem quickly.
Third, the shortcomings of ETF funds
1, lack of initiative
ETF fund itself exists to track the index, so it is difficult to take the initiative to operate and rely on the trend of the index to invest, so it may miss some big market opportunities.
2. Institutional investment has obvious advantages.
As a new financial tool, ETF funds still have some problems in many details, such as the liquidity of ETF funds and market loopholes, and institutional investors can use this situation to earn higher returns because of the support of more financial resources and information resources.
3. Active funds cannot be completely replaced.
ETF fund is a passive investment method which mainly tracks the index. Compared with active funds, ETF funds may not be flexible enough in some cases. In addition, ETF funds cannot develop innovative index products, so they cannot completely replace active funds.
Fourth, how to choose and invest in ETF funds
1. Focus on investment strategy
ETF fund is different from other fund products, so it is important to pay attention to its investment strategy. Investors can choose ETF products that match their risk tolerance.
2. Portfolio should be diversified.
There are relatively many kinds of investment portfolios of ETF funds, and there is a certain correlation between different ETF funds. Therefore, investors need to allocate funds in a decentralized manner to reduce the risk of individual stocks.
3. Pay attention to the fund cost.
We should also pay attention to the ETF fund management fee rate, bid-ask spread and other expenses, and reasonable cost control is also very important for investment success.