Exchange-traded index funds, often referred to as exchange-traded funds (Exchange Traded Funds, referred to as "ETF"), ETF is an exchange-traded fund share of the variable of an open-end fund.
Exchange-traded index funds are open-end fund is a special type of closed-end funds, and it combines the advantages of open-end fund, investors can either ETF shares traded in the secondary market, they can purchase or redeem fund management companies back to the ETF shares, but must purchase a basket of shares redeemed (or a small amount of cash) in exchange for fund shares or to fund shares in exchange for a basket of stocks (or a small amount of cash). Owing to the existence of secondary market transactions and subscription and redemption mechanism, secondary market investors can trade in the ETF price and NAV when the difference between the arbitrage trading. Arbitrage mechanism, there can ETF to avoid closed-end fund discount common problem.
Two ways investors can buy ETF: in the stock market closed, following the day of the NAV of fund managers to buy (and common as open-end mutual fund); also from other directly in the stock market, where investors purchase, purchase price determined by the buyers and sellers together, often with funds at this price there is a certain gap between the net value (the same as an ordinary closed-end funds).
ETF Advantages1, ETF-diversification, to reduce investment riskInvestors buy units of a fund China - Shanghai 50ETF, equal to the purchase by the weight of all the SSE 50 Index stocks.
2, ETF-both the characteristics of stocks and index funds(1) for ordinary investors, ETF shares can be as common as in the transaction split into smaller units, in exchange secondary market trading. (2) make the index to make money, investors no longer have to research stocks, shares the worry about stepping on landmines; (2010, short of China's securities market mechanism does not currently exist, so there is a "index fell would lose money," the of 2010 in April, the index futures opened December 5, 2011, the ETF fund has seven subject areas included in margin)
3, ETF closed with a combination of the advantages of open-end fund
ETF and closed-end funds we are familiar with, like, can be small "units" in the form of exchange-traded. With a similar open-end funds, ETF allows investors to continuously purchase and redemption, but redemption of ETF at the time, investors not to get cash, but a basket of stocks at the same time required to reach a certain size before allowing the purchase and redemption back. ETF and closed-end funds compared to the same point is to have exchange-listed securities, like stocks listed on the transaction at any time of day, the difference is: ① ETF transparent. Because investors can continuously Subscription / Redemption, requiring fund managers and portfolio announced net frequency of the corresponding speed. ② As a continuous subscription / redemption mechanism exists, ETF's NAV and market price theory does not exist a discount / premium. ETF fund compared with the open-end funds, there are two advantages: First ETF on the Exchange listed transaction at any time of day, with the convenience of the transaction. Open-end funds generally can only be opened once a day, investors only once a day trading opportunities (ie, subscription and redemption); Second ETF redemption is to deliver a basket of stocks, without the need to retain cash to facilitate the operations manager, can improve the Fund investment management efficiency. Open-end funds often need to keep some cash to meet redemptions, open-end fund investors when the fund shares, when redeemed, often forcing fund managers constantly adjust the investment mix, the resulting tax and investment opportunities in some of the losses by those who do not require the redemption of long-term investor. This mechanism ensures that when some investors to redeem ETF when the ETF's long-term investors do not have much impact (because redemption of the stock).
4, ETF trading costAlthough the ETF in exchange-traded costs has not been finalized, but is estimated to not exceed the cost of closed-end funds, which are now far more open-ended fund subscription and redemption fees low.
5, the day investors can arbitrage.
For example, the card 50 in a major fluctuations in the trading day, the day was more than 5% intraday gain to close it flat or even decline. Open for ordinary investors, index funds, intraday or longer most of the day does not make sense, redemption price can only be calculated based on closing price, ETF's characteristics can help investors to seize the opportunity to dish up. As the exchange every 15 seconds to display a IOPV (net valuation), this index reflects the ups and downs IOPV immediately bring changes in net funds, ETF's secondary market prices change with IOPV, so investors can dish rose promptly thrown in the secondary market when the ETF, index day delivery rose to get the benefits.
Showing posts with label ETF. Show all posts
Showing posts with label ETF. Show all posts
Tuesday, January 3, 2012
Thursday, October 22, 2009
ETF Investment Strategy
ETF Investment Strategy
How to use the ETF investment vehicle to achieve the established investment goal?
1) long-term investment Because the risk of dispersion of ETF is good, transparent, subject to the manager little impact on subjective factors, it can expect strong, investors have more adequate information. Overseas experience has shown that in mature markets, active management of index funds to keep fighting the probability is very low, investment in the longer, the probability of fund managers beat the index is smaller; because of the low-cost index funds, long-term investment because of significant effects of compound interest increase in the relative income level of index funds. From the long-term investments, wealth preservation and appreciation of the point of view, investment ETF is a better choice. Investors can use to buy and hold strategy of low share index of the long-term growth of capital appreciation.
2) Short-term investments
For those who want to quickly access the whole market or market-specific part of the opportunity to capture some short-term investors, ETF is an ideal tool. This is because the ETF in the trading system and the stocks and bonds, can be bought to sell at break-neck speed in order to respond to changes in the market, although each transaction has a cost, but the transaction rate is relatively low. Investors can trade through active ETF, for index day fluctuations in short-term fluctuations (more than one day) to bring the band returns.
The specific method is:
(1) day fluctuations in operation: a Market (ETF share of the purchase, redemption), the secondary market (ETF share transactions) with the operation, can be recycled many times, investors do not take up a lot of money in the case of profit, as if " 42 "dial" daughter, "and raise efficiency in the use of funds.
(2) short-term (more than one day) fluctuations in operation: similar to stock trading, short-term bullish, buying ETF, bearish sell ETF, to make the difference.
3) the timing ETF is tracking its underlying index portfolio consisting of stocks, so changes in the ETF is equivalent to increase or decrease in the stock position. For Quotes change requires large-scale changes in the stock position of the investors, and more than directly to changes in the ETF shares to avoid the trouble of delivery to reduce the impact of stock prices quickly out of the market. ETF arbitrage mechanism of special help to improve liquidity and reduce the impact of large transaction costs. Therefore, ETF investors can be highly effective timing tool.
4) wheeled investment ETF investors can actively adjust the portfolio of ETF portfolio by updating the weight, position, and buy to sell on behalf of different styles, different sections of the ETF, to build a variety of market exposure in order to achieve a variety of investment strategies. In portfolio management, you can use ETF to diversify the international (for example, be introduced in future cross-border ETF), the domestic, industry, style, and market exposure, investors prefer to build a portfolio. For example, when investors are bullish on investment opportunities in a given country, you can buy the State through the ETF rather than directly investing in foreign stocks, foreign stock market exposure to achieve; when investors prefer a certain industry or a particular section, they can be investment in the corresponding sector ETF. So, to meet specific investment preferences, it is also a certain degree of diversification of risk.
5) carry trade When the secondary market trading price of ETF shares and the net value of deviation from the fund, that is there discount / premium, investors can be in the primary market, secondary market, and arbitrage between the spot market to obtain risk-free returns. A single trading day, investors can operate on many occasions. In the premise of risk aversion, raising the profitability of the constituent stocks ETF positions, increase the efficiency of fund use. The specific method is:
(1) When the ETF market price is less than 2 net value of fund shares, ETF shares in the secondary market to buy and make redemption, and then received a combination of the securities redeemed immediately sold;
(2) When the secondary market price of ETF shares is greater than the fund net buying in the secondary market portfolio and the purchase into the ETF shares, and then immediately sell the purchase of ETF shares.
6) asset allocation The use of ETF portfolio allocation to achieve the core / satellite strategy. Core / satellite strategy is an important asset allocation strategy, that is in accordance with laws of the solar system, "one center, multiple growing points" will be the portfolio's assets are divided into two categories separately configured, in which the core asset tracking to copy the selected market index indexation investment in order to obtain a particular market, the average earnings; other assets, use of initiative and investment strategies in order to capture the market a wide range of investment opportunities. As the ETF has traded convenience, therefore, through the core / satellite asset allocation method, investors can always re-deployment of assets, without the need for multi-stock delivery. Blue-chip index tracking ETF is usually as a core asset, in order to ensure that the core investment component does not lag behind the overall market; while tracking the industry, style, regional and other index ETF usually presented as complementary assets of institutional investors, or holdings of a relatively optimistic about the asset class, or higher levels of risk-return asset classes, such as energy stocks, growth stocks or funds. In addition, investors can also use a proactive strategy combination of the core structure in order to avoid missing other investment opportunities, can be various types of ETF as a satellite strategy.
7) Cash management
As the ETF liquidity and strong capital settlement, high efficiency, risk diversification, therefore, the use of ETF portfolio to achieve cash management, you can replace the combination of cash reserves to avoid the market soaring in Ta Kong. Open-end fund managers in the investment process often encounter such a dilemma, that is, the cash in the asset portfolio unforeseen circumstances, it is necessary to retain a certain percentage of cash to prepare for the need of redemption (which generally represents a portfolio the total value of 5%), but also to avoid the formation of the impact of cash drag on portfolio returns. If you can invest in ETF, then this problem will be solved. Funds can be combined idle cash to buy ETF, redemption in the face of much-needed cash, you can sell the ETF in the market, raise the necessary redemption funds, to avoid direct basis for the stock sell-off portfolio. The use of ETF portfolio management of cash, will not change the portfolio's investment objectives, it would not increase the risk of portfolio trading, transaction costs and expenses.
8) the transitional period Asset Management Change in the investment manager of institutional investors, the assets can be used as a transitional period of ETF asset management form. That is even before taking office the new investment manager to put his assets into ETF, to maintain investment in value-added opportunities; selection of the new investment manager, cash ETF, or to directly to the new investment portfolio managers.
9) development of related structured derivative products As low-cost, high mobility, the relevant financial institutions can use to build ETF related financial products, such as capital preservation funds, structured products, investment-oriented life insurance policies.
How to use the ETF investment vehicle to achieve the established investment goal?
1) long-term investment Because the risk of dispersion of ETF is good, transparent, subject to the manager little impact on subjective factors, it can expect strong, investors have more adequate information. Overseas experience has shown that in mature markets, active management of index funds to keep fighting the probability is very low, investment in the longer, the probability of fund managers beat the index is smaller; because of the low-cost index funds, long-term investment because of significant effects of compound interest increase in the relative income level of index funds. From the long-term investments, wealth preservation and appreciation of the point of view, investment ETF is a better choice. Investors can use to buy and hold strategy of low share index of the long-term growth of capital appreciation.
2) Short-term investments
For those who want to quickly access the whole market or market-specific part of the opportunity to capture some short-term investors, ETF is an ideal tool. This is because the ETF in the trading system and the stocks and bonds, can be bought to sell at break-neck speed in order to respond to changes in the market, although each transaction has a cost, but the transaction rate is relatively low. Investors can trade through active ETF, for index day fluctuations in short-term fluctuations (more than one day) to bring the band returns.
The specific method is:
(1) day fluctuations in operation: a Market (ETF share of the purchase, redemption), the secondary market (ETF share transactions) with the operation, can be recycled many times, investors do not take up a lot of money in the case of profit, as if " 42 "dial" daughter, "and raise efficiency in the use of funds.
(2) short-term (more than one day) fluctuations in operation: similar to stock trading, short-term bullish, buying ETF, bearish sell ETF, to make the difference.
3) the timing ETF is tracking its underlying index portfolio consisting of stocks, so changes in the ETF is equivalent to increase or decrease in the stock position. For Quotes change requires large-scale changes in the stock position of the investors, and more than directly to changes in the ETF shares to avoid the trouble of delivery to reduce the impact of stock prices quickly out of the market. ETF arbitrage mechanism of special help to improve liquidity and reduce the impact of large transaction costs. Therefore, ETF investors can be highly effective timing tool.
4) wheeled investment ETF investors can actively adjust the portfolio of ETF portfolio by updating the weight, position, and buy to sell on behalf of different styles, different sections of the ETF, to build a variety of market exposure in order to achieve a variety of investment strategies. In portfolio management, you can use ETF to diversify the international (for example, be introduced in future cross-border ETF), the domestic, industry, style, and market exposure, investors prefer to build a portfolio. For example, when investors are bullish on investment opportunities in a given country, you can buy the State through the ETF rather than directly investing in foreign stocks, foreign stock market exposure to achieve; when investors prefer a certain industry or a particular section, they can be investment in the corresponding sector ETF. So, to meet specific investment preferences, it is also a certain degree of diversification of risk.
5) carry trade When the secondary market trading price of ETF shares and the net value of deviation from the fund, that is there discount / premium, investors can be in the primary market, secondary market, and arbitrage between the spot market to obtain risk-free returns. A single trading day, investors can operate on many occasions. In the premise of risk aversion, raising the profitability of the constituent stocks ETF positions, increase the efficiency of fund use. The specific method is:
(1) When the ETF market price is less than 2 net value of fund shares, ETF shares in the secondary market to buy and make redemption, and then received a combination of the securities redeemed immediately sold;
(2) When the secondary market price of ETF shares is greater than the fund net buying in the secondary market portfolio and the purchase into the ETF shares, and then immediately sell the purchase of ETF shares.
6) asset allocation The use of ETF portfolio allocation to achieve the core / satellite strategy. Core / satellite strategy is an important asset allocation strategy, that is in accordance with laws of the solar system, "one center, multiple growing points" will be the portfolio's assets are divided into two categories separately configured, in which the core asset tracking to copy the selected market index indexation investment in order to obtain a particular market, the average earnings; other assets, use of initiative and investment strategies in order to capture the market a wide range of investment opportunities. As the ETF has traded convenience, therefore, through the core / satellite asset allocation method, investors can always re-deployment of assets, without the need for multi-stock delivery. Blue-chip index tracking ETF is usually as a core asset, in order to ensure that the core investment component does not lag behind the overall market; while tracking the industry, style, regional and other index ETF usually presented as complementary assets of institutional investors, or holdings of a relatively optimistic about the asset class, or higher levels of risk-return asset classes, such as energy stocks, growth stocks or funds. In addition, investors can also use a proactive strategy combination of the core structure in order to avoid missing other investment opportunities, can be various types of ETF as a satellite strategy.
7) Cash management
As the ETF liquidity and strong capital settlement, high efficiency, risk diversification, therefore, the use of ETF portfolio to achieve cash management, you can replace the combination of cash reserves to avoid the market soaring in Ta Kong. Open-end fund managers in the investment process often encounter such a dilemma, that is, the cash in the asset portfolio unforeseen circumstances, it is necessary to retain a certain percentage of cash to prepare for the need of redemption (which generally represents a portfolio the total value of 5%), but also to avoid the formation of the impact of cash drag on portfolio returns. If you can invest in ETF, then this problem will be solved. Funds can be combined idle cash to buy ETF, redemption in the face of much-needed cash, you can sell the ETF in the market, raise the necessary redemption funds, to avoid direct basis for the stock sell-off portfolio. The use of ETF portfolio management of cash, will not change the portfolio's investment objectives, it would not increase the risk of portfolio trading, transaction costs and expenses.
8) the transitional period Asset Management Change in the investment manager of institutional investors, the assets can be used as a transitional period of ETF asset management form. That is even before taking office the new investment manager to put his assets into ETF, to maintain investment in value-added opportunities; selection of the new investment manager, cash ETF, or to directly to the new investment portfolio managers.
9) development of related structured derivative products As low-cost, high mobility, the relevant financial institutions can use to build ETF related financial products, such as capital preservation funds, structured products, investment-oriented life insurance policies.
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