Generally speaking, the bond ETF mainly adopts the representative stratified sampling replication strategy. According to the size and liquidity of the constituent bonds in the underlying bond index, the bonds with larger scale and better liquidity are selected by sampling. For those bonds with poor liquidity, bond ETFs generally do not sample.
As an open-end fund with uncertain duration, bond ETF's asset portfolio is always in the process of dynamic adjustment, and holding bond ETF is equivalent to holding bonds that will never expire. Although the bond ETF is good, it does not mean that the bond ETF will make a steady profit.
The constituent bonds of bond ETF may fluctuate under the influence of various factors, which will cause the fluctuation of the net asset value of bond ETF and generate potential investment risks. Although there is a certain arbitrage mechanism in bond ETF, the transaction price of the fund tends to be consistent with the net value, but the transaction price of the fund will be affected by market supply and demand and other factors, and there may be a short-term deviation from the net value of the fund share.
At the time of subscription, if the investor fails to provide the required subscription consideration, the subscription application may fail; At the time of redemption, if the investor's qualified fund share is insufficient or the required cash is not prepared enough, or the fund portfolio does not have enough redemption consideration, the redemption application may fail.
Because ETF has objective risks, investors should fully consider it when investing. The yield of bonds is also relatively high, because the existence of bonds with poor liquidity has lowered the overall yield. The bond ETF mainly chooses bonds with large scale and good liquidity, so the income is generally higher than that of direct investment bonds.