Hello fellow investors! With the development of financial markets, diversified investment methods are becoming increasingly abundant. Today I will bring you the most popular ETF tips to make investing easier!
1. Introduction to ETF
Q1: What is ETF?
ETF is the abbreviation of Exchange Traded Fund, which is called Exchange Traded Fund in Chinese. As the name suggests, ETFs are funds that can be traded on exchanges like stocks. So what is its relationship with stocks? Let me give an example here and everyone will understand it immediately.
You must have been to a hot pot restaurant, right? There are a lot of mushroom dishes on the menu of this hot pot restaurant, such as shiitake mushrooms, seafood mushrooms, and enoki mushrooms. You don’t know which one to order or how to order each one. If you want to eat some, what should you do? The store will cut a little of each mushroom and sell it to you as a platter. This is what ETFs look like. There are more than 3,800 stocks in the A-share market, but you don’t know what to buy, or you want to buy a little of each, what should you do? The fund company puts a basket of stocks in an ETF, cuts it into small pieces, and sells it to you. So, ETF is a stock platter.
Figure: ETF consists of a basket of stocks
Q2: Why choose ETF?
Regarding this question, we will compare stocks, OTC funds and ETFs to explain why you should choose ETFs for investment.
First, let’s take a look at the advantages of ETFs over stocks.
Ø The first point is that ETF can be regarded as a diversified investment portfolio. The rise and fall of each stock in this portfolio will have a relatively small impact on it. You only need to choose a good industry or concept sector. Just keep investing.
Ø The second point is tax benefits. As we all know, when you sell stocks, you will be charged one thousandth of the stamp duty. However, ETF transactions, whether buying or selling, do not charge this stamp duty. The higher the trading frequency of your strategy, the more obvious this advantage will be.
Figure: Comparison between ETFs and stocks
Next, let’s take a look at what are the advantages of ETFs compared with over-the-counter open-end funds ?
First of all, the most important thing is that the rates are low. Because ETF is a passive index fund, the fund manager only needs to track the index step by step, so its management fee is relatively low, usually around 0.5%. As for active funds, the management fee is usually about 1.5%. For example, if you buy a fund worth 10,000 yuan, the ETF will charge you 50 yuan a year, and the over-the-counter open-end fund will charge you 150 yuan. This money will be paid regardless of whether your fund makes money or loses money, so the lower the better.
Secondly, it is convenient. ETFs can be bought and sold during trading hours, so the funds will be credited immediately after buying. After selling, the funds will be available on the same day and can be withdrawn the next day. And this transaction is not like redemption, it only charges you transaction commission. Let’s calculate it based on 2.5 million, which is much lower than the 0.15% subscription fee of over-the-counter funds after a 10% discount. Not to mention redemption fees based on the holding period.
The last point is transparency in operation. After 8:30 every morning, we can go to the websites of the Shanghai Stock Exchange and the Shenzhen Stock Exchange to check the ETF subscription and redemption lists published on that day. This application and redemption list actually represents the ETF's latest holdings, ratio, , so we can think of the ETF as which announces its holdings on a daily basis. This greatly facilitates us ordinary investors to monitor the behavior of fund managers. As for OTC open-end funds, they will only announce their latest positions in the quarterly report, which means that you can only see the positions of this fund once every three months. For example, a fund called so-and-so small and medium-cap fund went to top-allocate Kweichow Moutai , Wuliangye , treating itself as a liquor-themed fund.
2. Types of ETFs
Q3: What types of ETFs are there & how to use ETFs for asset allocation?
ETFs are divided into many types, but the main ones are stock ETFs, bond ETFs, commodity ETFs and currency ETF.
1, Currency ETF
We will not expand on currency ETFs. I believe everyone is familiar with them. They can be simply understood as Yu'e Bao in the securities market.
2, Stock ETF
Stock ETF is the ETF we mentioned earlier, which invests in a basket of stocks. For example, our most common 300ETF is an ETF that invests in Shanghai and Shenzhen 300 Index . Its heavyweight holdings often include core A-share assets such as Ping An of China, Kweichow Moutai, China Merchants Bank, and Gree Electric. Buying 300ET is equivalent to buying the stocks of all these companies in the Shanghai and Shenzhen 300 Index.
3, Treasury Bond ETF
Treasury Bond ETF is the most common bond ETF in the A-share market. A bond is equivalent to an IOU. You lend money to someone else, and then they write an IOU saying that they owe you money and they will pay you interest regularly. So when you hold this IOU, you have the right to collect interest and ask him to get the money back when it expires. National bonds, which can be said to be the most credible bonds in the country. Buying treasury bond ETFs is equivalent to buying Chinese treasury bonds, and you can get income close to the interest on treasury bonds. The varieties of
4 and commodity ETF
can be said to be underdeveloped in the Chinese market. There is actually only one variety in operation - gold ETF. If you want to invest in crude oil, another pillar of the commodity world, you can only go next door and look for LOF. Gold ETF, as the name suggests, is an ETF that invests in gold. Buying this is basically equivalent to buying gold. Everyone knows that gold is a good anti-inflation product. If you have anti-inflation needs, it is appropriate to allocate it appropriately.
Let’s continue to talk about what types of ETFs different people should invest in
Let’s first take 300ETF and treasury bond ETFs as examples to see what the yield curve of investing in stock ETFs and bond ETFs is like, as can be seen from the figure below , bond ETFs basically go all the way north and straight up, while the yield curve of stock ETFs fluctuates greatly. The highest return for six consecutive months is 100.75%, and the worst return for six consecutive months is -30.95%, but in the end it The cumulative return is higher than that of bond ETFs. So we can draw a conclusion that stock ETFs have high returns but high volatility, while bond ETFs have low returns and low volatility.
Data source: Wind information
Therefore, the first approach we recommend is to invest entirely in stock ETFs. This approach has the highest returns in the long run. But this is only suitable for friends who have long-term idle funds. Stock ETFs are likely to fall sharply in the short term. For example, if you spend all your money to buy stock ETFs today, the stock market will plummet for half a year, losing 50%. My family is hospitalized and I need to pay the hospitalization fee tonight. Then I look at my asset balance and see that I don’t have enough money. This is not appropriate. Therefore, it is only recommended for friends who have long-term idle funds that can be used for investment.
The second way is to invest in stock ETFs and bond ETFs at the same time, such as a simple 55-opening, half stock ETF and half bond ETF. In this way, the volatility of the entire portfolio will be reduced, and in the long run it will have a higher rate of return than purely investing in bond ETFs. This approach is more suitable for friends who can't sleep at night when stocks fall and for friends who have potential short-term capital needs. Because the funds invested in bond ETFs have steadily increased in value and can be cashed out at any time, they can be used as emergency funds, while the funds invested in stock ETFs can bring me higher returns in the long term.
If you are worried about the current environment of high inflation, you can go a step further and add about 10% of gold ETFs to your investment portfolio to combat inflation. How to use ETFs for asset allocation is actually a very complicated issue. Due to time constraints today, I will just give a brief introduction. If you are interested, you can leave me a message. If there are more friends who are interested, we can Dedicate an issue to this issue.
Figure: ETF type configuration
3. ETF selection
Q4: How to choose ETF?
High-quality ETFs generally have two obvious characteristics:
1. Good liquidity
What does good liquidity mean? The first is that the spread between buying and selling is small. Although ETFs can be subscribed and redeemed, the threshold is relatively high and ordinary investors generally cannot participate. We generally conduct ETF transactions through buying and selling. So the smaller the bid-ask spread, the smaller the increase we need to start making money after buying. If we buy an ETF with a bid-ask spread of only 0.001 yuan, we will make a profit as long as the price rises by 0.002 yuan. Second, it means that its trading volume is large. About half of the ETFs in the A-share market have a daily turnover of less than 2 million. If you buy these ETFs, there is a risk of not being able to sell them. Therefore, we should try to choose ETFs with large trading volumes and small bid-ask spreads.
2, low rates. The fees of
ETF mainly include management fees, which are the money paid to the fund companies; custody fees , which are the money paid to the custody institutions; and index usage fees, which are the money paid to the index compilation agency. . Generally speaking, the custody fees and index usage fees for ETFs tracking the same index are the same, so we can mainly focus on the management fees. The investment targets of ETFs that track the same index are highly convergent, so generally speaking, the lower the fee, the higher the yield of the ETF. For example, Huatai-Berry CSI 300 ETF is the largest 300 ETF. Its management fee is 0.5%, which is much lower than OTC funds. But we can still find this one, E Fund CSI 300 ETF, which has a scale of 0.5%. It is much smaller, but its management fee is only 0.15%, which is 0.35% lower than the former. Therefore, its return rate during the same period is higher than that of Huatai's 300 ETF. Assuming that you started investing in these two ETFs at the same time in March 2013, the annualized rate of return for your investment in the Huatai-Berry CSI 300 ETF was 6.89%, while the annualized rate of return for the E Fund CSI 300 ETF was 7.71%. This is just like when we usually save money. I want to save more money, but I can't increase my salary. What should I do? I can only reduce my expenses. If I spend less, I will naturally have more leftover.
Under the current situation where domestic and foreign markets are affected by the epidemic and the global stock market is volatile, only recommends one standard for the selection of ETFs, and that is which is cheap enough. Only if it is cheap enough can it have a thick enough safety pad. We have conducted a comparative analysis of several major indexes in the A-share market:
Data source: Wind information
As can be seen from the above table, among several major indexes, the PE and PB quantiles of Shanghai Stock Exchange 50 and China Securities 500 Compared with other indexes, they are lower and below the chance value. Everyone knows that , SSE 50, and CSI 500 are representative indexes of large-cap stocks and small- and medium-cap stocks respectively. Therefore, if you want to invest in large-cap stocks, you can invest in the 50ETF. If you are more optimistic about the growth of these small and medium-sized enterprises Chances are, that 500ETF is a good choice.
Disclaimer: The above content does not recommend stocks and does not constitute investment advice. Operations based on this are at your own risk. There are risks in the stock market and you need to be cautious when entering the market.
