How to Decipher an ETF Name?: A Simple Guide
by Gregory Krahmer | October 15, 2024
What’s The Name of The Passive Investing Game?
The names of ETFs and funds may sound complicated at first glance, but this guide will help you decipher them. ETF means an Exchange-Traded Fund: “An investment vehicle that puts a group of securities into a fund. It can be traded like an individual stock on an exchange.” They have incredible names like: “iShares Core MSCI EM IMI UCITS ETF USD (Acc) (EUR)”. These cryptic names may look like hieroglyphs, but they’re usually based on simple logic that can help you understand whether an ETF is right for you. Once you know how to “read” an ETF, you’ll be able to search much faster and use the bullet points below to find the information that applies to you.
1. The Name of ETFs: Understanding Their Significance
The name of an ETF is made up of certain terms that highlight key characteristics. The structure usually looks something like this: “iShares Core MSCI World UCITS ETF USD (Acc) (EUR)”. The names usually consist of 5 or more components. They may be in a different order or some
individual terms may be omitted, but the principle remains the same. To clarify what these terms tell you about the characteristics, let’s look at some examples of the names of well-known ETFs. You will hear us talking a lot about the MSCI World Index, so it is always useful to know what we mean by that.
2. Which Provider Issued the ETF? Probably Vanguard and BlackRock
The first thing you often see is the name of the ETF provider. For example: “iShares Core MSCI World UCITS ETF USD (Acc) (EUR)“. The names of the ETF providers are often part of a large bank or asset managers. iShares is part of BlackRock, while Xtrackers is a brand in which Deutsche Bank issues ETFs.
3. Basic Range: What range does the ETF have?
The name of the provider is also often shown with the terms “Core” or “Prime”’ in the example above. This means that the ETF is part of a subgroup of what the provider offers. ETFs with these terms often have low costs and are often an important part of a globally diversified index, such as the MSCI World Index or the FTSE 100.
4. Index: Which Index Does the ETF track?: What are you investing in?
The next section is the index that the ETF tracks. For example, “iShares Core MSCI World UCITS ETF USD (Acc) (EUR)”. This ETF tracks the MSCI World Index. Well-known indices are: “MSCI, FTSE and S&P.” They provide independent verification of the indices and license them to the ETF providers.
The name often also includes the areas in which you invest or the number of shares that the ETF tracks. The EURO STOXX 50 tracks the 50 largest companies traded in the Eurozone. You may also see indices with the letters NR, TR or TRN. NR stands for Net Return, TR is Total Return and TRN is Total Return Net. These abbreviations tell you whether the performance of the index is calculated before or after taxes on dividends. Although this has no effect on the performance of the ETF itself, which simply pays out all the dividends you are entitled to.
5. Information About Regulations: What does this mean exactly?
Important for consumer protection. Always look for the word UCITS in the ETF name. This means that the ETF meets European requirements to be able to and may sell it to private investors in a regulated manner. UCITS ETFs must meet certain conditions such as not investing more than 20% of their assets in one security, which helps to diversify the product.
The abbreviation ETF is also in a class of its own. It ensures that it distinguishes itself from other products such as ETCs (Exchange Traded Commodities) and ETNs (Exchange Traded Notes). ETCs and ETNs are not UCITS-related and carry additional risks that ETFs do not. So do your research before you decide to invest in them.
6. Share Class: Characteristics of the ETF
At the end of the name of the ETF, you will usually find abbreviations that refer to the class of the ETF. With “Xtrackers S&P 500 UCITS ETF 1C” you can see this clearly. ETFs are often issued in different classes. These can vary, for example, in terms of costs, currency or whether the dividend is used to pay out or whether they reinvest the dividend. You can find the exact version of the ETF you want based on the unique ISIN-code. This ensures that you know for sure that the ETF you are investing in actually invests in €, for example. Income paid out as dividends or interest is sent to your broker account or is automatically reinvested in the ETF to make your investments grow faster. ETFs that pay dividends are known as “distributing” and are often denoted by (Dist) in their name, such as “iShares Core FTSE 100 UCITS ETF (Dist)”. ETFs that reinvest dividends are called “capitalizing” or “accumulating” and are often denoted by (Acc) as in “iShares FTSE 100 UCITS ETF (Acc)”. Distributing ETFs are abbreviated as: D, Dist, Inc. Capitalizing ETFs usually have the following abbreviations in their name: C, Acc.
7. Currency: For The Euros and Dollars
ETFs that invest in a currency other than the € (from my side of the earth), carry a currency risk. If the name of the ETF indicates that it is EUR hedged, this means that this ETF is protected against fluctuations in currency by means of options or forward contracts. In the case of the “iShares Core MSCI World UCITS ETF USD (Acc) (EUR)”, a Dutch person or someone else with the € as a means of payment earns the performance of the US index here, because the hedge, the currency risk between the euro and the dollar, is removed from the equation. If a currency is listed in the name without the term “hedged” in it, this usually means that this is the currency in which the ETFs are traded. Products are usually offered in different currencies. (GBP, EUR, USD) on different exchanges.
8. Domicile: Where is its establishment located?
Some ETF providers state that they are based in Ireland. This is because an Irish home base can provide a tax advantage for some investors. The domicile, or the legal establishment of a financial product, is an important consideration for investors, particularly in the context of asset allocation and tax efficiency. This is because an Irish home base can provide a tax advantage for some investors. The abbreviation “(IE)” in “UBS ETF (IE) DJ Global Select Dividend UCITS ETF (USD) A-dis” is a good example of this.
9. Index Funds and Exchange-Traded Funds: What is the difference?
A mutual fund that tracks an index is typically referred to as an index fund. Similar in construction, an Exchange-Traded Fund (ETF) will track an index by holding its stocks. The distinction between an index fund and an ETF is that the former is typically more affordable and liquid than the latter. While a mutual fund only trades through a broker at the end of each trading day, you can purchase an ETF from a broker who will execute the trade all day long.
10. How to Invest in ETFs: Your first trade
ETFs trade through brokers, and many sources provide pre-screened brokers in the ETF industry. Individuals can also purchase ETFs in their retirement accounts. An ETF’s expense ratio is the cost to operate and manage the fund. ETFs typically have low expenses because they track an index. And usually the lower expense ratio. Most of these platforms offer commission-free trading, meaning that investors don’t have to pay fees to the platform providers to buy or sell ETFs. The cost of running and managing an Exchange-Traded Fund (ETF) is known as its expense ratio. Since ETFs follow an index, they usually have low costs. Additionally, the best ratio is typically the lower one, which includes nearly everything. Definitely.
The majority of online investing platforms, retirement account provider websites, and investing apps such as Peaks NL, FreeSTOXX, Freedom24, Trading212 and much, much more offer Exchange-Traded Funds (ETFs). In order to purchase or sell ETFs, investors do not need to pay fees to the platform providers because the majority of these platforms offer commission-free trading.
Investors can search after opening and funding a brokerage account. After creating and funding a brokerage account, investors can search for ETFs and make their chosen buys and sells. One of the best ways to narrow ETF options is to utilize an ETF
screening tool with criteria such as trading volume, expense ratio, past performance, holdings, and commission costs. Or use your new knowledge.
Final Conclusion
ETF names can be confusing at first glance, but that doesn’t have to take long. We’ve listed the most important points to look for when looking for a good ETF. The best thing to do is to get the information from the name of the ETF and then take a further look. Begin by numbering 1 to 8 out to see some good results. 1. Name, 2. Provider, 3. Range, 4. Index, 5. Regulations, 6. Share class, 7. Currency and 8. Domicile/Establishment. Then find a list of the different versions of the ETF in question. If you then search for these ETFs, you can find a document called “The Key Investor Information” and “The (Simplified) Prospectus”. Find the one that suits you best. If you want to know everything about the ETF you’ve chosen, we also have an article explaining how to scan the key investor information like a pro. It’s called How to read the essential investor information?. This way, you know exactly what happens to your money.
Any questions? Let me know in the comments below.
