ETF Glossary
Published by Radif Partners
All the key terms you need to understand ETF investing
This glossary defines the terms that regulatory documents use without explaining them, and defines them in the precise sense they carry in those documents rather than an approximate one: tracking difference and tracking error, which do not measure the same thing, ongoing charges and total cost of ownership, physical, sampled and synthetic replication, accumulation and distribution, domicile, withholding tax, securities lending, the summary risk indicator, net asset value and market price, the spread between buying and selling price, market maker, rebalancing, free float, weight capping. Each entry says where the term appears, key information document, prospectus or annual report, because knowing which document to open saves more time than the definition itself. Terms in English, common on factsheets, appear with their equivalent. Entries are deliberately short and each says what the term comes down to in practice: what it tells you about cost, about tracking quality or about tax, so that the definition helps directly while reading a key information document.
The costliest confusions
Four pairs of terms are regularly mixed up, and each confusion costs money. Ongoing charges are not total cost: they exclude the fund's internal transaction costs. Tracking difference is not tracking error: the first is a cumulative return gap, the second a measure of dispersion. Distribution yield is not performance. And net asset value is not the price at which you buy: between the two sit the market spread and the timing of your order.
How this glossary is maintained
Definitions follow the terminology of European texts, the key information regulation, the UCITS directive, the sustainability disclosure regulation, rather than issuers' commercial vocabulary, which varies from house to house. Where a term has no regulatory definition, the entry says so and gives the dominant market usage. Entries are reviewed at every site update, and a definition that changes with regulation carries its date.
Where the terms appear
Three documents cover almost everything. The key information document gives costs, the risk indicator and the distribution policy on two pages. The prospectus describes the replication method, securities lending and investment limits. The annual report holds tracking difference, internal transaction costs and lending income, which are precisely the figures missing from the factsheet. Read those three in that order and a fourth comparison site becomes unnecessary.