Know what you own
Choosing an ETF
Compare exposure, diversification, risk and structure before choosing between ETFs.
Core versus specialist ETFs: what role does the fund play?
A core ETF invests across a broad market and may form a substantial part of a portfolio. A specialist ETF focuses on a narrower country, sector, theme or investment style.
Read guide 12Global ETFs explained: do they cover the whole world?
Not always. A global ETF may cover developed markets only, developed and emerging markets, or a narrower selection of countries. Check the index or investment strategy rather than relying on the word “global”.
Read guide 13Diversification: does an ETF spread my risk?
Diversification means spreading your money across different companies, countries and sectors. It can reduce the impact of one investment performing badly. It cannot prevent the value of your investment from falling.
Read guide 14Risk and volatility: how much could an ETF fall?
Every investment carries risk. An ETF can lose value, sometimes sharply. Diversification may reduce some risks, but it cannot protect you from a fall in the market as a whole.
Read guide 15What does an ETF risk score of 1–7 mean?
An ETF’s current PRIIPs Key Information Document, or KID, normally shows a Summary Risk Indicator from 1 to 7. Lower numbers indicate a lower assessed risk category and higher numbers a higher category. A score of 1 does not mean risk-free. The score is a starting point, not a complete description of the investment.
Read guide 16Can two ETFs with the same risk score have different risks?
Yes. Two ETFs can share the same 1–7 Summary Risk Indicator while investing in different assets and exposing you to different risks. The score groups products into broad categories. It does not mean their holdings, possible losses or behaviour during market stress are identical.
Read guide 17ETF overlap: am I buying the same investments twice?
Owning several ETFs does not necessarily mean you are well diversified. Different ETFs can hold many of the same companies, creating more concentration than you realise.
Read guide 18Currency exposure: does buying in euros remove currency risk?
No. The currency in which an ETF trades is not necessarily the currency of the investments it owns.
Read guide 19How does the ETF replicate its index?
An ETF can follow its index by holding the investments directly or by using a financial contract with another institution. These approaches are known as physical and synthetic replication.
Read guide 20Thematic ETFs: opportunity or investment hype?
A thematic ETF invests in companies linked to a trend such as artificial intelligence, clean energy, robotics or cybersecurity. It can provide focused exposure, but it is usually less diversified and more sensitive to changing expectations than a broad-market ETF.
Read guide 21ESG ETFs explained: what does the label mean?
An ESG ETF uses environmental, social or governance rules when selecting or weighting investments. There is no single ESG standard, so two ESG ETFs can hold very different companies.
Read guide 22Market-cap weighted versus equal-weight ETFs
A market-cap-weighted ETF gives larger companies larger weights. An equal-weight ETF gives each company a similar starting weight. This changes the fund’s concentration, trading activity and performance.
Read guide 23ETF fund size and age: do they matter?
Fund size and age can indicate whether an ETF is established, but bigger and older do not automatically mean better. Small funds may face a greater risk of closure, while newer funds have less operating and performance history to examine.
Read guide 24UCITS and ETF domicile: what do they mean?
UCITS is a European regulatory framework for investment funds. An ETF’s domicile is the country where the fund is legally established. These details affect the fund’s legal structure, oversight, documents and sometimes tax treatment.
Read guide 25What are the most common ETF mistakes?
Common ETF mistakes include choosing from the name alone, chasing recent performance, overlooking overlap and focusing only on the TER (the stated annual fund operating charge). Most can be avoided by checking what the ETF owns, how it fits with your other investments and what it costs in total.
Read guide 26Can you own too many ETFs?
Yes. Adding ETFs can improve diversification, but too many can create overlap, unnecessary cost and a portfolio that is difficult to understand or maintain.
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