All along, we have referred to individual stock investors as "retail investors."

And those who buy funds are called "fund investors."

Although everyone is ultimately investing in the A-share market, they are two different groups.

Originally, there was a strong sense of boundary between the two.

Some retail investors would never put their money into funds, preferring to lose on their own rather than let others manage it and lose without understanding why.

On the other hand, some fund investors, seeing retail investors lose so much in stock trading that they can't recover, always believe that buying funds has a chance in the long run. They think that non-professionals investing in stocks are asking for trouble.

The result is that both stock investors and fund investors lose money, and when the market is not good, everyone naturally loses money.

This is a story of the pot calling the kettle black.

However, in the past two years, with the rise of a certain thing, the sense of boundary between stock investors and fund investors has become increasingly blurred.

This magical thing is the ETF (Exchange Traded Fund).ETFs are a revolution, and not just in the A-share market, but also in the global market.

In the United States, a large amount of capital has begun to lose faith in active management and has turned to ETFs.

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Many retail investors are also no longer buying individual stocks and have turned to ETFs.

In the domestic market, the national team's increase in stock holdings is also completed through ETFs.

It seems that more and more people are realizing the investment in ETFs, a game between stocks and funds.

Whether retail investors should participate in ETF investment is a question worth thinking about.

The essence of ETFs is relatively easy to understand, index funds, which is a basket of stocks.

ETF funds have intraday trading, that is, real-time trading.

For those who buy funds outside the market, it increases liquidity and volatility, and the trading cost is also lower.For those who buy stocks in the market, they can directly purchase indices without the need to select individual stocks, thus avoiding pitfalls and reducing the effort required for stock selection.

It seems that ETF investment is a win-win situation, achieving two benefits at once.

Overseas, ETF investment is highly regarded because, when looking at the long term, many actively managed funds fail to outperform index ETFs in terms of returns.

In fact, the investment returns of the vast majority of retail investors also fail to outpace the index.

Therefore, from this perspective, buying some ETFs is the right choice.

However, this rightness comes with conditions, which is to consider it from a long-term perspective, rather than from the perspective of short-term trading.

But precisely because of the existence of short-term trading, many retail investors treat ETFs as a tool for short-term trading, operating them like stock transactions.

The results are predictable.

The shortcomings of ETFs are naturally exposed.

One is that the increase in ETFs is not as high as that of the leading stocks in the sector.During the rise, ETFs have a weakness, which is that they don't rise much.

It's normal for the index to rise less than individual stocks, it has always been like this.

This is because it takes more capital to push the index up, while the rise of a single stock requires less capital, and the stock is more active.

Therefore, from the perspective of short-term trading, the rise of ETFs is not as good as that of small-cap stocks in the sector, nor is it as good as the leading stocks in the sector.

It will give people a somewhat unattractive and uncomfortable feeling.

Especially many retail investors think it's easy to catch the leader, and ETFs seem more cumbersome.

Another is the volatility of ETFs themselves, which increases the difficulty of operation.

Many retail investors like to make some small high-throw and low-absorb to make money.

But the fluctuation of ETFs is actually relatively small compared to stocks.

Many ETFs fall by 1-2%, and when they rise, they also rise by 1-2%.ETFs can at best be used for swing trading, but it is difficult to engage in short-term trading due to the small fluctuation range.

Unless the capital volume is large, otherwise, with the capital volume of small retail investors, trading ETFs is really a bit too tiring, and the frequency of taking the elevator is relatively high.

This leads many retail investors to believe that they cannot make money by trading ETFs.

Another point is that during the downtrend, ETFs only fall less, but they do not stop falling.

Similarly, when the index falls, ETFs will also bring losses.

This is also very uncomfortable, although ETFs will fall less, but they do not stop falling.

Losing less may seem like nothing in the early stages, but falling a lot is also unbearable.

Some ETFs have extreme declines of 30-40%, which also causes significant losses for retail investors.

The fund nature of ETFs makes its position very awkward in the eyes of retail investors.

This has led to some changes in the reputation of ETFs in the past two years, and there are significant differences in everyone's views.In fact, the essence of everything stems from the same source of profit and loss.

This is also where the pros and cons of ETFs lie.

1. ETFs have small gains, but their increases can outperform most individual stocks in a sector.

Although ETFs may have small gains, the gains of sector leaders are indeed greater.

But if you think carefully, how many leaders can a sector have.

If a sector has 50 stocks, how many can an ETF outperform, has it exceeded half?

Many times, what we see are the survivors, and we ignore those who have already fallen.

It's like when we say that indices are distorted and individual stocks are losing money, it's the same principle.

That's because the index has outperformed the returns of the vast majority of individual stocks, rather than being distorted.Weighted stocks tend to fall less and rise more, as the listed companies are of higher quality.

2. ETFs have lower volatility, which smooths out risk and reduces the losses from fluctuations.

It is often said that ETFs have lower volatility, and this lower volatility also has its corresponding benefits.

The greater the fluctuation, the easier it is to chase gains and cut losses, which is more likely to result in losses.

In a volatile market, most retail investors tend to lose money by chasing gains and cutting losses, but ETFs may experience narrow fluctuations with no trading.

The dopamine that stimulates you to trade comes from the ups and downs.

However, you often only see the ups and overlook the downs.

3. ETFs can also fall, but there is no risk of a sudden collapse, and the index will not be delisted.

When individual stocks fall, there is also a very serious issue: whether to cut losses, add to the position, or wait.

When ETFs fall, at least one thing is certain: there is no risk of a sudden collapse in performance, and there is no risk of delisting.To put it bluntly, based on valuation levels, it is possible to boldly replenish positions.

The safety margin of ETFs is much higher than that of individual stocks, and it is a great advantage when bottom-fishing at the end of a bear market.

The risk of bottom-fishing for individual stocks is extremely high, while the risk of bottom-fishing with ETFs is minimal.

ETF investment itself is not suitable for all retail investors, especially those with a higher risk preference.

Index funds are more inclined towards investment rather than speculation.

Therefore, many retail investors have a poor understanding of ETFs, leading to losses and a mental explosion after purchasing.

At the very beginning, if you get the purpose of the investment tool wrong, the investment will naturally not go smoothly.

Any investment product or tool has adaptability, just like many people are not suitable for stock trading at all.

When you "go astray," it is best to first correct your behavior, do not make mistakes on fundamental issues, rather than looking for ways to make money.

If the direction is wrong, you will eventually go further and further away.