Glossary
The ETF lingo, explained
The terms you'll see on ETF pages, in plain words.
Terms
- 1-month return
- How much an investment’s price went up or down over one month, as a percentage. EasyCompare also shows 3-month, 6-month, 1-year and since-listing returns.
- Absolute return
- How much an investment gained or lost on its own, without comparing it with a benchmark.
- Actively managed
- A fund whose manager chooses the investments, aiming to do better than a benchmark, instead of copying an index.
- Alpha
- How much an investment did better or worse than its benchmark. Mostly used for actively managed funds.
- Asset allocation
- How your money is split between asset classes such as shares, bonds, property and cash. It’s one of the biggest drivers of risk and return.
- Asset class
- A group of investments that behave in similar ways, such as shares (equity), bonds (fixed income), property, commodities or cash.
- Ask price
- The lowest price a seller will currently accept.
- Beta
- How much an investment tends to move with the market. A beta of 1 moves in line with it; most index-tracking ETFs aim for that.
- Bid price
- The highest price a buyer will currently pay.
- Bid-ask spread
- The gap between the bid and ask prices. A wide spread usually means fewer people are trading.
- Collective investment scheme
- A fund that pools money from many investors, who each own a share of it. ETFs and unit trusts are both collective investment schemes.
- Daily change
- How much the price moved since the previous day’s close.
- Diversification
- Spreading your money across different investments, so one doing badly matters less.
- Dividends
- Part of a company’s profit paid to its shareholders. An ETF that “pays dividends” passes them on to you; one that “reinvests dividends” puts them back into the fund.
- Dividend frequency
- How often an ETF pays out dividends, for example quarterly.
- Domestic and foreign
- Whether an ETF invests in South African assets, assets in other countries, or both.
- Exchange traded fund (ETF)
- A fund that holds a basket of investments and trades on a stock exchange like a share.
- Exchange traded note (ETN)
- A debt instrument whose return follows an index. Unlike an ETF, you don’t own the underlying assets, so you depend on the issuer.
- Fund size
- The total value of the money invested in a fund.
- Fund strategy
- The approach a fund follows, such as tracking a broad market, focusing on dividends or holding government bonds.
- Geo focus
- The part of the world a fund invests in.
- Inception date
- The date a fund started.
- Index
- A measure of how a group of investments is doing, such as the JSE Top 40 or the S&P 500. Many ETFs are built to track one.
- Index tracked
- The index an ETF aims to follow.
- Index weighting
- How much of each investment an index holds: by company size (market cap), equally, by dividends and so on.
- Institution
- The company that issues and manages the ETF.
- JSE code
- The short code an ETF trades under on the Johannesburg Stock Exchange.
- Liquidity
- How easily you can buy or sell an investment without moving its price.
- Maximum drawdown
- The biggest fall from a high point to a low point over a period.
- Physical ETF
- An ETF that owns the assets in its index. A synthetic ETF uses contracts to get the same returns instead.
- Risk profile
- A rough guide to how much an investment’s value can rise and fall, from conservative to aggressive.
- Standard deviation
- How widely returns move around their average. Higher means a bumpier ride.
- Tax-free savings account (TFSA)
- A South African account where you pay no tax on interest, dividends or growth, within yearly and lifetime limits. Many ETFs can go in one.
- Total expense ratio (TER)
- The yearly cost of running a fund, as a percentage of its value. It’s taken from the fund, not charged to you separately.
- Transaction costs
- The costs of buying and selling, such as brokerage and taxes.
- Year to date (YTD)
- The period from the start of this calendar year until today.