Ask HN: What are your instruments for investment?

> Because if they're traded on the stock market then they're prone to be affected by the forces that affect the stocks.

but they aren't exactly like stocks - ETFs act like stocks for people buying/selling, but there is an extra participant in the market called Authorized Participant (AP). This is an entity with a special position in the stock market which has the privilege of redeeming ETF units to obtain their underlying stocks, and well as parcelling up stocks and trade them for a unit of ETF.

See https://docs.google.com/viewer?url=https://www.blackrock.com... for details

But essentially, ETF act like stocks, but there's always a flexible amount of outstanding units (unlike stocks in companies, which usually have a fixed number of units outstanding). Investors buy/sell ETFs between each other most times, and the AP doesn't get involved (and thus units outstanding doesn't change). But at some point, demand for ETF units grow to be bigger than the numbers available for sale (everyone is holding it and not selling, for example), and the price of each unit grows. At some point, it makes sense for the AP to buy up the set of underlying stocks, parcel it up and trade them for an ETF unit (from the ETF issuer - like vanguard), and sell it for an arbitraged profit. This then increases the number of units outstanding for the ETF, and thus, reduces demand, and stablizing the prices.

The opposite also happens - when there are too many sellers of an ETF, the AP will purchase the ETF and redeem the underlying stocks from the issuer, and sell those stocks for an arbitraged profit. So the end result is that the value of each individual ETF unit almost exactly match the value of the parcel of shares it represents (as the AP is financially incentivized to buy/sell and arbitrage any profit out of this difference).

from Hacker News https://ift.tt/3hKg84t