Do you ever hear terms related to exchange traded funds (ETFs) and wonder what exactly do they mean? Morningstar’s ETF newsletter reviews some of the ones they use when looking at performance history.
- NAV Return Percentage – An ETF has a fair market price and a net asset value. Both measures can be used to compute a return. NAV’s are the funds value minus liabilities and is reported daily.
- Tax Cost Ratio – This expresses, in percentage terms, the returns lost to taxes. It is the same as an expense ratio that shows how much of a return is eaten up by fees.
- Correlation Score – This score indicates how closely a funds returns are effected by movements within the broad market. An ETF with a high correlation score is closely aligned with the broader market. This can be used for portfolio construction.
- Average Market Cap – This gives insight to the size of a typical holding in the ETF.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.