versions | Acc (Accumulating): Dividends are reinvested automatically, ideal for most Europeans to defer capital gains tax. Dist (Distributing): Dividends are paid out regularly, like in stocks. | | Swap-based replication (Synthetic ETFs) | In a swap-based ETF, the fund provider does not directly hold the exact stocks in the index. Instead, it buys a basket of highly liquid stocks, typically from developed markets, which may differ from the index it tracks. The fund provider then enters into a swap agreement with banks, where:

• The fund hands over the returns of its stock basket to the bank.
• In return, the bank guarantees the exact performance of the index the ETF is tracking.

One key advantage of this approach is that dividends are not directly received by the fund but instead go through the bank, allowing tax-efficient treatment in certain cases. For example, in a swap-based S&P 500 ETF, the usual 15% U.S. dividend withholding tax can be avoided. Given an average dividend yield of 1.27%, this results in an annual outperformance of approximately 0.2% compared to a physically replicated ETF.

The main criticism of swap-based ETFs is counterparty risk, meaning that if the bank defaults, the ETF might not receive the promised returns. However, this risk is mitigated by EU regulations, which limit counterparty exposure to 10% of the fund's value and require collateral. Moreover, if the bank were to fail, investors who hold broad market ETFs already own shares of the same bank, making the additional risk less significant. | | Physical replication | The fund manager buys the same stocks in the same proportions as the index it tracks. This approach reduces tracking error but may lead to higher costs due to trading fees and taxes on dividends. | | TER, Total Expense Ratio | The all-in fee charged annually by the fund manager.

If you invest 10 000€ in an ETF with a 0.07% TER, it means 7€ per year is deducted as a management fee. | | Domicile | The domicile of the fund can be seen from the ISIN code (IE = Ireland, LU = Luxembourg).

The domicile matters when the following criteria are met:

• The fund contains US companies.
• The fund has a physical replication method.

Ireland has a tax agreement with the US, which means it pays a 15% withholding tax, whereas other European countries pay a 30% tax.

The long-term average dividend yield for the S&P 500 is 1.82%, so the gain would be almost 0.3% per year. | | AUM, Assets Under Manage-ment | Assets Under Management - What is the value of the funds’ assets in money. AUM can grow through:

• people investing more money into the fund (ETF provider issues more shares)
• the value of assets is increasing.

Especially new and unpopular ETFs have low AUM, which means there is a risk that the fund provider will end / liquidate the ETF. For new ETFs, ExtraETF.com under “Chart” > “Fundsvolumen” or “Anzahl Fondsanteile” (number of shares), you can see how the popularity is developing. If it is going upwards - then the fund provider will most likely keep operating the ETF. | | Tracking Difference | The tracking difference is the key performance indicator of an ETF. Since an ETF aims to replicate an index, a good ETF may slightly outperform its benchmark through sampling, share lending, or optimization.

Tracking difference can be measured in two ways:

• Absolute tracking difference: The direct difference between the ETF and index performance.
• Relative tracking difference: The percentage deviation from the index.

Example: ETF performance: 24.7% Index performance: 24.5% Absolute tracking difference: +0.2% Relative tracking difference: (24.7 / 24.5) - 1 = +0.82%

A positive tracking difference means the ETF has outperformed its index, while a negative value indicates underperformance.

The comparison should be done of the Net Total Return (NTR) of the index, which assumes withholding taxes of the dividends. | | Spread | The difference between the bid (buy) and ask (sell) prices on the stock exchange.

Smaller ETFs generally have higher spreads, meaning you lose slightly more when buying or selling. However, for long-term investors, this is a minor concern as daily price fluctuations far outweigh the spread. |