1.1.5.5 ETF

Before we start exploring the ETF, let's first look at the concept of the fund.

The funds we mentioned here only cover the varieties in the financial market, and do not involve fund forms of other organizations in the society (such as charitable funds).

Funds are tools for investors who want to get the return from capital appreciation, but they lack the relevant financial knowledge, so they donate funds to professionals for management in some form. Professionals invest these funds in financial products such as bonds, commercial paper, stocks, commodities or other financial products.

There are three main ways in which funds operate:

• Open: Fund shares change at any time
• Closed: Fund share does not change
• ETF (Exchange Traded Fund): Fund share does not change

Here, we mainly conduct in-depth discussions on ETF. The share of the ETF will not change after the fund is completed, and the holder can trade in the secondary market if he wishes to convert the share into cash. The ETF also introduces a mechanism for the fund to exchange with the physical object. Due to the introduction of the mechanism, the premium or discount between the fund and the physical object is reduced. For example, an ETF tracks an index, and the index is composed of a series of stocks, so holders can also convert their share of funds into a series of stocks and change their own asset holding methods.

This feature of ETF funds is not available to other funds.

[Thinking] When choosing an ETF fund suitable for investment, what factors need to be considered in addition to considering the change of the index corresponding to the fund?

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