Why are index funds the sameETFMore popular?

In the past year or two, as more and more investors have learned how to invest, index funds, which are simple and convenient investment targets, have naturally become popular. It is worth noting that in index funds,ETFEspecially popular, with outstanding performance, even known as "battle funds", why are they also index funds,ETFFunds are more popular?Jinjiwo will answer this question in the following article.

Index fund refers to a fund product that invests assets in the constituent stocks of a specific index, with a specific index as the underlying asset. The fund can choose to invest in all or part of the constituent stocks of that specific index. Generally speaking, index funds align the trend of their investment portfolio with the underlying index to reduce tracking errors and achieve returns that are roughly the same as the underlying index.


andETFThe full name of the fund is a trading open-end index securities investment fund. Although it is also a type of index fundETFIt is an open-end fund that is listed and traded on an exchange, with variable fund shares, and combines the advantages of closed-end funds and open-end funds.


Jin Jiwo pointed out that the reasonETFThe fund is more excellent compared to ordinary index funds,ETFHas the following advantages:


1Multiple trading channels: Investors can buy and sell fund shares in the secondary market, as well as subscribe and redeem from fund management companiesETFThere are four ways for investors to buy and sell shares:


One is to buy on the exchange and sell on the exchange;


The second is on-site buying and off-site redemption;


The third is off exchange subscription and redemption;


The fourth is off exchange subscription and on exchange sale.


2Low cost: IfETFIt is a trading of fund shares conducted on the spot, which can avoid the subscription and redemption fees charged by the fund company. Calculated based on the transaction fees of stock trading, it is usually 10000 shares2.5%Left and right, even if there is a two-way fee, it is only 10000 copies5%Not for off-site funds1/10。


3There is an arbitrage mechanism: due toETFThere are two markets for funds: the on exchange market and the off exchange market, and there may be a certain difference in prices between the two markets, which allows investors to invest in both marketsETFObtain investment returns, and also through buying and sellingETFObtain price difference returns and engage in arbitrage.


4Higher investment efficiency: Traditional index funds use the principle of "unknown price" for trading, and the trading price is calculated based on the net asset value of the fund at the end of each trading day. The net asset value of the fund is only announced once a day, and trading requiresT+1even to the extent thatT+2Success can only be confirmed on a daily basis. ButETFFunds, like stocks, have real-time updated quotes and can be traded quickly on the stock exchange with high efficiency.


5Treat every investor fairly.ETFFunds are subscribed and redeemed based on a basket of stock ownership, and sudden large subscriptions will not affect the returns of existing holders.