Understanding ETFs: 8 Key Terms You Should Know

Why Knowing ETF Terms Matters

[{"selector":"#anim-5087f382-25b4-4532-be06-970210446081","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-20b708d5-1ee7-4cf3-8dad-c1e056c88a1d","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 1: NAV (Net Asset Value)

[{"selector":"#anim-b1a8e99a-e044-467d-af6c-ecead3edf2ae","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-c9f9213b-d6a5-4625-a641-1976fdbab917","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 2: Expense Ratio

[{"selector":"#anim-ee95ccd8-2d3f-466c-bb80-20d4f0ded809","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-7e73bb40-ba7f-4dbd-a2de-c0d6d2a58b08","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 3: Tracking Error

[{"selector":"#anim-2ab13ae2-97bd-476a-b922-aa53140cda80","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-64e62341-257e-4f87-91b4-5c2a533274b9","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 4: AUM (Assets Under Management)

[{"selector":"#anim-ada19d83-e9f1-4862-8028-0e51893c7b97","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-b1ed6874-759e-4081-9394-12de23fad94d","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 5: Liquidity

[{"selector":"#anim-17cb531f-5ee2-4cdf-83fa-c85b679f7a60","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-c8176914-feab-4577-8f96-ac0af7db4b90","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 6: Benchmark

[{"selector":"#anim-387fd644-4e09-415b-9491-6a72a3f05395","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-7ec8a8b9-fdde-4f83-9f6e-3b9d6245d1be","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 7: Underlying Asset

[{"selector":"#anim-c29b21f7-f30b-4f54-b46f-24053623cc03","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-7174e954-aa84-4762-8b04-e8db6834af34","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Key Term 8: Rebalancing

[{"selector":"#anim-16139c98-0d13-42b4-8819-c89370512277","keyframes":{"opacity":[1,1]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"both"}] [{"selector":"#anim-b1fbee2a-0cf2-42cf-8501-ceae4779f131","keyframes":{"transform":["scale(3)","scale(1)"]},"delay":0,"duration":1500,"easing":"cubic-bezier(.3,0,.55,1)","fill":"forwards"}]

Looking for the Best ETFs to Invest In?

Understanding ETFs: 8 Key Terms You Should Know

Why Knowing ETF Terms Matters

Understanding key ETF terms helps you evaluate funds, reduce risks, and make informed investment decisions.

Key Term 1: NAV (Net Asset Value)

NAV is the per-unit value of an ETF. It’s calculated by dividing the total assets of the fund by the number of units issued.

Key Term 2: Expense Ratio

This is the annual fee charged by the ETF as a percentage of your investment. A lower expense ratio means better cost efficiency for you.

Key Term 3: Tracking Error

Tracking error measures how closely the ETF’s performance matches its benchmark. Lower tracking error means better replication of the index or asset.

Key Term 4: AUM (Assets Under Management)

Tracking error measures how closely the ETF’s performance matches its benchmark. Lower tracking error means better replication of the index or asset.

Key Term 5: Liquidity

Liquidity reflects how easily you can buy or sell ETF units in the market. Higher liquidity means lower costs and ease of trading.

Key Term 6: Benchmark

The benchmark is the index or standard the ETF tracks, such as Nifty 50 for equity ETFs or gold prices for commodity ETFs.

Key Term 7: Underlying Asset

ETFs are designed to track specific assets like stocks, commodities, or bonds. Knowing the underlying asset helps you align with your investment goals

Key Term 8: Rebalancing

The periodic adjustment of the ETF's portfolio to align with its benchmark or asset allocation strategy.

Looking for the Best ETFs to Invest In?

Swipe up to discover the top 15 ETFs in India for 2024!