1. Diversify investment and reduce investment risk.
Investors buy a fund unit's SSE 50ETF, which is equivalent to buying all the stocks of SSE 50 Index by weight.
2. It has the characteristics of both stock and index fund.
For ordinary investors, ETFs can also be split into smaller marketing unit and traded in the secondary market of the exchange, just like ordinary stocks.
If you earn an index, you make money. Investors no longer need to study stocks and worry about stepping on mining stocks. However, because there is no short-selling mechanism in China stock market at present, it is still "the index will lose when it falls".
3. Combining the advantages of closed-end funds and open-end funds.
ETF, like the familiar closed-end fund, can be bought and sold on the exchange in the form of small "fund units". Similar to open-end funds, ETFs allow investors to continuously purchase and redeem. But when ETF is redeemed, investors get a basket of stocks, not cash; At the same time, it is required to reach a certain scale to allow subscription and redemption.
Compared with closed-end funds, they are similar: they can also be listed on the exchange, just like stocks, and can be traded at any time in a day; There are two differences:
First: ETFs are more transparent. Because investors can continue to purchase and redeem, the frequency of asking fund managers to announce their net worth and portfolio is also accelerated accordingly.
Second, due to the existence of the continuous subscription and redemption mechanism, there will not be too much discount/premium between the net value of ETF and the market price in theory.
Compared with open-end funds, open-end funds can only be opened once a day, and investors only have one trading opportunity every day (that is, subscription and redemption); ETF is listed on the exchange and can be traded at any time within one day, which is convenient for trading.
In addition, open-end funds often need to keep some cash for redemption, while ETF redeems by delivering a basket of stocks, which is convenient for managers to operate and can improve the management efficiency of fund investment. When investors of open-end funds redeem their fund shares, they often force fund managers to constantly adjust their investment portfolios, and the resulting taxes and losses of some investment opportunities are borne by those long-term investment examiners who have not asked for redemption; And ETF, even if some investors redeem it, has little impact on long-term investors (because it redeems stocks).
4. It provides ordinary investors with the opportunity of arbitrage on the same day.
For example, SSE 50 fluctuated sharply in a trading day, with an intraday increase of more than 5%, but it closed flat or even fell. For investors of ordinary open-end index funds, intraday gains are mostly meaningless, and the redemption price can only be calculated according to the closing price. The characteristics of ETF can help investors seize the opportunity of intraday rise. Because the exchange displays the IOPV every 15 seconds, this IOPV immediately reflects the change of the fund's net value caused by the rise and fall of the index, and the secondary market price of ETF changes with the change of IOPV. Therefore, investors can throw ETFs in the secondary market in time when the intraday index rises, and obtain the benefits brought by the intraday index rise.