First of all, ETFs can be purchased and redeemed like open-end funds. However, the subscription of ETF means that investors exchange physical objects (cash for open-end funds) for a fixed number of ETF fund shares of fund management companies; Redemption is to exchange a fixed number of ETF fund shares from the fund management company for a basket of index stocks (not cash).
Secondly, in terms of transaction costs. Traditional open-end funds have to pay about 1.0%~ 1.5% management fee every year, which is much higher than ETF management fee (about 0.3%~0.5%). In addition, traditional open-end funds need to pay about 1% for subscription and 1.5% for redemption, while ETF only needs to pay 0.2% commission to brokers when trading, which is relatively cheaper than open-end funds.
Third, in terms of fund management methods. ETF management belongs to "passive management". ETF managers will not take the initiative to choose stocks. The constituent stocks of the index are ETF stock selection, and the focus of ETF operation is not to outperform the index, but to track the index. A successful ETF can be exactly the same as the underlying index as far as possible, that is, it can "copy" the index and let investors earn the return rate of the index with peace of mind. Most of the traditional management methods of stock funds belong to "active management", and fund managers mainly choose stocks actively to achieve the goal of surpassing the market index.
In addition, in terms of trading methods. After the ETF is listed, the trading method is just like a stock, and the price will change at any time in the intraday trading, so it is very convenient for investors to place orders and buy and sell in the intraday trading. The traditional open-end fund takes the net value of fund shares after the daily closing as the trading price of the day.