The capital structure affects funds in specific ways that can affect performance and risk. For example, Vanguard Total Bond Market (NYSEArca: BND) is a share class of the $68.8 billion sister bond fund, which helps offset the risk of illiquid securities. Thus, BND can invest in a broader range of bonds compared to the smaller iShares Barclays Aggregate Bond Fund (NYSEArca: AGG) and SPDR Barclays Capital Aggregate Bond ETF (NYSEArca: LAG). The effect can be seen in their annual returns: AGG and LAG have had annual returns that varied up to 3.2% off the market index, whereas BND has never veered more than 2.3%.

Finally, the composition of funds can also impact both performance and risk. For example, PowerShares QQQ Trust, Series 1 (NASDAQ: QQQQ) tracks the the Nasdaq 100 index of non-financial stocks while Fidelity NASDAQ Composite Index Fund ETF-Tracking NUS (NASDAQ: ONEQ) tracks almost all 2,000 stocks in the Nasdaq. Over the last five years, QQQQ’s average annual return has been 6.1% compared to ONEQ’s 4.4%. iShares FTSE/Xinhua China (NYSEArca: FXI) is the largest China ETF, but holds only 25 of the largest and most liquid stocks in China, resulting in about half of its assets allocated to state-owned and financial stocks. Compare that to SPDR S&P China ETF (NYSEArca: GXC) which holds 129 different stocks and provides diversification against China’s fiscal policies.

For more stories about ETFs, visit our ETF 101 category.

Sumin Kim contributed to this article.