In the last class, we introduced in detail the sources of income of index enhancement funds, including index enhancement funds, some common index enhancement strategies, what are the differences between index enhancement funds and other types of index enhancement funds, and the c

In the last class, we introduced in detail the index enhancement fund , including the sources of income of index enhancement funds, some common index enhancement strategies, what are the differences between index enhancement funds and other types of index increase funds, and the current situation of index increase funds. Finally, we will introduce to you how to choose index increase funds.

In this lesson, we will focus on explaining ETF. As one of the very important tools for investment index, we have also introduced the advantages and disadvantages of ETFs and the precautions when investing in some previous courses. In this lesson, we will explain ETFs more completely.

includes the current development status of ETFs, the trading methods of EFTs, the advantages and uses of ETFs, and what things to note when investing in ETFs.
1. The current status of the ETF family

Let’s first introduce the current development status of ETF.

According to wind data, as of August 29, 2022, the scale of all listed ETFs has reached 1.5 trillion yuan, with a total of 728, of which 455 were listed on and on , with a total scale of 1.2 trillion yuan, with a remaining 0.3 trillion yuan, and 273 ETFs are listed on the Shenzhen Stock Exchange.

is mainly listed in stock ETFs, with a total of 595 stocks, with a scale of 994.8 billion yuan. Among stock ETFs, in terms of quantity, the theme index is mainly based on the theme index, with 335 ETFs. However, in terms of scale, the scale index and theme index are relatively large, with 462.1 billion yuan and 325.8 billion yuan respectively.

Source: wind, data as of 2022/8/29

From the perspective of fund management companies, among the stock ETFs, the highest ETF issuance scale and number is Huaxia Fund Company . A total of 54 ETFs have been issued, and the ETF scale has reached 179.1 billion yuan. The second-ranked E Fund Fund Company has an ETF scale of 98.926 billion yuan. The gap between

is quite obvious. We can also see that Huaxia is indeed significantly ahead of its peers in ETF.

Source: wind, data As of the second quarter of 2022

In fact, if we want to look at the origin of China ETF, our first ETF was issued by Huaxia Fund Company, which was the Huaxia Shanghai Stock Exchange 50 ETF established in 2004.

At first, the development of my country's ETFs was relatively slow. Until the end of 2009, there were only 9 ETFs in my country, with a scale of only 66.2 billion yuan. However, the scale of ETFs showed the first significant increase since 2012, from 75.1 billion yuan in 2011 to 160.1 billion yuan in 2012. The increase in the scale of ETFs from 2012 to 2018 is mainly reflected in the efforts of broad-based ETFs.

However, since 2018, the market has paid more attention to the investment opportunities of structural market . Since then, narrow base has entered a period of rapid growth, and the issuance of industry-themed track index ETFs has increased to meet investors' investment needs for structural markets. In 2019, fund companies issued 41 industry-themed ETFs and 24 wide base indexes; in 2020, 46 industry-themed ETFs were issued, and only 29 wide base indexes were issued, and fund companies have begun to accelerate their layout in the industry-themed ETF market.

Source: wind, data As of 2022/8/29

We just look at the changes in the past year, the share of ETFs increased by more than 400 billion shares, reaching 1.4 trillion shares, an increase of 44.15%, and 172 new ETF funds were issued.

From the perspective of industry classification, the industry with the largest share increase is pharmaceutical, and currently 13 funds are tracked; from the perspective of theme, the industry with the largest share increase is Biomedical , and 25 funds are tracked.

From the perspective of index targets, the index target with the largest share increase in the past year is Hang Seng Internet technology industry, with an increase of 233.47%, and 1 fund tracked it.

, whether it is biomedicine or Hang Seng Internet Technology, these are one of the main directions with a large decline from the beginning of 2021 to the present. Perhaps these two major fields have entered a range of reasonable valuations or undervalued valuations after a sharp decline, thus becoming the main layout direction of the market in the past year.

In addition, the index with the highest returns is CSI 800 Energy, reaching 43.28%, and one fund tracked it.
2.ETF trading method
2.1ETF subscription method
ETF subscription occurs before the establishment of the fund and during the fundraising period. The subscription method of ETF can be divided into three ways: online cash subscription, offline cash subscription, and offline portfolio securities subscription:
online cash subscription , which refers to the subscription made by investors through securities accounts, using the exchange online system, and can be operated through the brokerage trading software. However, after investors declare the shares they want to subscribe, the order cannot be withdrawn. Generally, online cash subscription is conducted 3 days before the end of the issuance, and the subscription starting point is mostly 1,000 copies or an integer multiple of them.
offline cash subscription refers to investors using cash to subscribe through the fund manager and their designated offering agency. The ETF shares of offline cash subscription will be prepared by the fund manager to prepare a list of offline cash subscription ETF shares. The subscription time runs throughout the entire issuance period, usually 1,000 copies or an integer multiple of them. Subscriptions made through the fund manager usually start at 50,000 copies. Offline cash subscription operations can cancel orders.
offline combination securities subscription refers to the subscription of investors in a basket of stocks through the issuance agency designated by the fund manager. The subscription time also runs throughout the issuance period. Investors need to declare the number of shares of a single stock, and these stocks must be component of the index tracked by the ETF. The subscription starts at 1,000 shares, and the excess is an integer multiple of 100 shares. The redemption method of
2.2ETF
ETF takes physical redemption, and take stock ETFs as an example. When applying, you need to prepare a stock combination corresponding to the index. When redeeming the ETF, you also get a stock combination corresponding to the index. Moreover, the subscription threshold for ETFs is high, at least 300,000 copies, which is not suitable for ordinary investors to operate. The way of buying and selling in the secondary market is much more convenient. Advantages and uses of
3.ETF
Accurate order
ETF can be traded on the market, just like buying and selling stocks, trading according to real-time prices, so you can accurately grasp the buying and selling price.

In fact, for many ordinary investors, if they can grasp the big trend and make plans in a fixed investment, they can get a pretty good return.

However, for some investors with rich investment experience, the ETF's intra-trade trading method allows everyone to accurately choose the timing and grasp the price of buying and selling, rather than placing an order before 15 o'clock like the buying and selling of over-the-counter funds, and trading at the price after the closing, which will miss the opportunity for intraday layout.
bottom-buy
First of all, what we are talking about is not to buy at the lowest point. After all, it is very difficult to predict the market, so the bottom we are talking about here is a range. When the investment target is not expensive, or calls back to for a period of time and enters the undervalued range, you can use ETFs to buy and buy at the bottom.

So why not buy the bottom of stock ? It is mainly about studying individual stocks that are too difficult for ordinary investors. ETFs can spread risks in different stocks and can also meet the investment needs of everyone who wants to invest in a certain industry or theme.

For example, choose an industry with a clear path to long-term growth, such as consumption, new energy or semiconductors, etc., and then determine the valuation of the industry at this time based on the ten-year valuation quarterlite, and choose to buy when the valuation is reasonable or undervalued. It is likely that it can be profitable in the long run, and for ordinary investors, the operation difficulty will not be too high.
arbitrage
ETF can be applied for and redeemed in the primary market and traded in the secondary market. This trading mechanism brings investors the opportunity to earn the difference and conduct arbitrage.

When applying for ETFs, you need to prepare a basket of stocks corresponding to the index. When redeeming the ETFs, you will also get a basket of stocks. If you want to cash out, you can trade in the secondary market.

and ETF products can be purchased on T-day, and can be sold on the secondary market on the same day. Although ETFs purchased on the secondary market on the same day cannot be sold on the secondary market on the same day, they can be redeemed in the primary market. This mechanism of buying, selling and trading on the same day provides convenience for ETFs to cross-market arbitrage.

However, the application threshold for ETFs is very high, generally more than 300,000 copies, or even up to one million copies. Therefore, this arbitrage method is not very suitable for ordinary investors, but more suitable for institutional investors to arbitrage.
4. ETF investment precautions

In the previous course, when we introduced how to choose ETFs, we mentioned the importance of scale, liquidity, tracking error, fee rate and fund company platform for us when choosing ETFs.

Here we will add two things to note when choosing ETFs from the perspective of investors.
risk tolerance
ETF also follows the law of high risk and high return. Broad-based index funds generally have lower volatility, but their returns will also be relatively low.

narrow-based index funds generally have greater volatility and higher returns, especially for growth-based industry theme indexes, which will be more obvious.

Therefore, when investors choose ETFs, they must combine their own risk tolerance. If they are sensitive to risks and cannot accept a large drawdown, they can try to choose ETFs with lower volatility and reduce their requirements for yield .
Multi-type ETFs are relatively rich in combination with
ETFs. We have also introduced them before. The wide-based index includes large-cap index, small and medium-cap index, and science and technology innovation board and GEM related indexes with strong growth attributes. In the

narrow-based index, there are various industry indexes and theme indexes. According to the different strategies for screening index components, there is also strategy index . Finally, the screening is based on the growth factor and value factor, and there can be a style index.

So we can configure multiple types of ETF combination according to our needs to further diversify risks.

For example, if you are optimistic about the development of the new energy industry, you can configure some ETFs in the new energy industry, but this type of growth industry will have higher volatility and greater risks. At this time, you can configure some broad-based indexes like the Shanghai and Shenzhen 300 as the bottom position to balance risks and returns.