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ETFs (Exchange Traded Funds)

An ETF is a basket of securities (stocks, bonds, commodities, or a mix) that trades on an exchange like a single stock. ETFs combine the diversification of mutual funds with the real-time trading flexibility of stocks.

🔑 Key Characteristics

Property Detail
Code in LibreFolio ETF
Pricing Real-time exchange prices, like stocks
Currency Denominated in the listing exchange's currency
Dividends May distribute (Dist) or reinvest internally (Acc)
TER Total Expense Ratio — annual management fee deducted from NAV
Typical providers Yahoo Finance, justETF, Borsa Italiana, CSS Scraper

In LibreFolio, ETF is the code for a fund of mixed or unstated content; a fund that holds a single asset class takes one of six subtypes (ETF_STOCK, ETF_BOND, ETF_COMMODITY, ETF_REAL_ESTATE, ETF_CRYPTO, ETF_MONETARY), listed in the ETF family table with their composite icons and the class each one rolls up to.

📊 Accumulating vs Distributing

Feature Accumulating (Acc) Distributing (Dist)
Dividends Reinvested internally Paid out to holders
Tax event Only on sale On each distribution
Compounding Full compound growth Reduced by tax drag
Best for Long-term growth Income needs

The tax deferral advantage of accumulating ETFs can be significant over long horizons.

  • NAV (Net Asset Value): The true value of underlying holdings ÷ shares outstanding. Computed daily.
  • Market Price: What the ETF actually trades for on the exchange. Can deviate slightly from NAV.
  • Premium/Discount: When market price > NAV, the ETF trades at a premium; when < NAV, at a discount.

🔍 Index Tracking

Most ETFs track a benchmark index (e.g., S&P 500, MSCI World). The tracking error measures how much the ETF's return deviates from the index:

\[ TE = \sigma(R_{ETF} - R_{index}) \]

Lower tracking error = better replication of the index.