In recent years, investment and financial management have been increasingly valued by more and more people. An increasing number of novice investors and beginners are starting to gradually invest in the capital market.

Faced with a variety of stocks in the secondary market, novice investors find it difficult to make the right choices. At this time, the investment value of ETFs is highlighted.

What is an ETF?

An Exchange Traded Fund (ETF), also known as a trading type open-end index fund, is a type of open-end fund that is listed for trading on the exchange and has variable fund shares.

Put simply, an ETF is a type of fund that can be both subscribed and redeemed in the primary market, and directly bought and sold in the secondary market.

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Here, let's briefly explain what the primary market and the secondary market are.

The primary market, also known as the issuance market, is an abstract market. It can be simply understood that when we usually subscribe and redeem funds, it is in the primary market.

The secondary market, also known as the securities trading market, is a concrete market. It can be simply understood that when we usually buy and sell stocks, it is in the secondary market.

The most important difference between ETF funds and ordinary funds, and also their biggest feature, is that ETF funds are equivalent to a basket of stocks, rather than the shares of ordinary funds, which we will explain in detail later.Classification of ETF Funds

Currently, there are approximately 350 ETF products that can be traded on the secondary market. The ones we commonly encounter are categorized as follows:

Index ETFs

These refer to ETFs that track various broad market indices, with their composition consisting of a basket of stocks that track the index, such as the SSE 50 ETF, CSI 300 ETF, and CSI 500 ETF.

Industry ETFs

These refer to ETFs that track various industry-leading stock indices, with their composition consisting of a basket of leading stocks from each industry, such as the Pharmaceutical ETF, Military Industry ETF, and Securities ETF.

Currency ETFs

These refer to currency funds that can be traded on the market, with their composition consisting of a basket of currencies, such as Huatai Tianyi and Yinhua Daily Profit.

Bond ETFs

These refer to bond funds that can be traded on the market, with their composition consisting of a basket of bonds, such as Government Bond ETFs and Convertible Bond ETFs.Of course, there are other types, but due to their low total volume, we rarely come into contact with them in our daily lives, so they will not be introduced here.

Trading Methods of ETF Funds

As mentioned earlier, ETF funds can be both bought and sold, and also subscribed and redeemed, which means that there are two trading methods for ETF funds.

Secondary Market Trading of ETFs

ETF funds can be normally bought and sold in the secondary market, just like other stocks, and the trading rules and fees also follow the relevant regulations of the securities exchange.

Primary Market Subscription and Redemption of ETFs

ETF funds can also be subscribed and redeemed in the primary market. However, the subscription and redemption of ETFs must be done in exchange for a basket of stocks to subscribe for and redeem the shares of the ETF fund.

Because of the cross-market trading system, we can use a basket of stocks to subscribe to a certain ETF in the primary market, and then sell the ETF in the secondary market. Similarly, we can also buy a certain ETF in the secondary market and redeem it in the primary market to obtain a basket of stocks. Of course, this requires our "basket" of stocks to have a sufficient position and requires us to have sufficient funds. Generally, few retail investors operate in this way.

Advantages of Investing in ETF Funds

More Convenient for Capital Market InvestmentFor novices who want to invest in the stock market and are unsure of how to choose stocks, selecting ETFs (Exchange Traded Funds) is the best way to participate. Choose an index you are optimistic about, such as the SSE 50 Index, or choose an industry you are optimistic about, such as the technology industry, and directly select the corresponding ETF to purchase through securities trading software. You can profit from the entire index or industry while avoiding the trouble of selecting individual stocks. Moreover, the position of ETF funds is generally high, and it is not easy to miss out in a bull market.

Investment direction is rich

With the rapid development of China's capital market in recent years, ETF funds can cover almost all industries and types. We can choose the right ETF investment based on our understanding of the market and the industry.

Investment risk is relatively low

As a combination of a basket of stocks, ETF funds greatly reduce the possibility of individual stock explosions. Holding ETFs is more reassuring and more suitable for long-term investment.

Trading is fast

ETFs can be traded on the secondary market, and those purchased on the first trading day can be sold on the second trading day, with funds available immediately.

Low cost

The management fees, operating fees, stamp duties, etc., of ETF funds have advantages compared to ordinary funds. If the transaction fees selected when opening a securities account are low, the advantages will be more obvious.

Arbitrage across markets is possible

Considering that ETF funds can be traded on the secondary market and can be redeemed across markets, the value of ETFs in the primary and secondary markets may deviate. Investors can use this deviation for arbitrage operations.

Suitable for fixed investment

The usual price of ETF funds will not exceed 10 yuan, and the general price is between 1-5 yuan per share. A hand is 100 shares, which is only a few hundred yuan, and it is completely suitable for small fixed investment.How to Purchase ETF Funds

Once we have chosen the ETF we want to invest in, we can open the securities trading software and, through our own securities account, buy and sell ETF funds just like stocks.

Trading Time

Both the Shanghai and Shenzhen stock exchanges have the same trading hours, which are from 9:30 am to 11:30 am and from 1:00 pm to 3:00 pm on trading days.

Trading Unit

Similar to stocks, the minimum trading unit is one lot, which is 100 shares of ETF. Taking the 50ETF mentioned earlier as an example, to buy one lot, you only need to have a balance of more than 300 yuan available in your securities account.

Price Fluctuation Limit

Like stocks, the maximum price fluctuation limit is 10%.

Trading Rules

Most ETFs follow the T+1 trading rule, with some ETFs allowing T+0 trading.Seeing this, everyone should have a basic understanding of ETF funds, and I hope this article will be helpful to all investment beginners.