Physical ETF Definition

Learn the definition of physical ETF and other ETF terminology from the glossary.

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Learn more about Physical ETF

A Physical ETF, also known as a ""replication"" or ""in-kind"" ETF, stands out for its unique characteristic of physically holding the assets that constitute the underlying index. Unlike Synthetic ETFs that use derivatives, Physical ETFs directly own the securities in proportions mirroring the index. This approach, involving the actual ownership of underlying assets, enhances transparency, mitigates tracking errors, and fosters investor confidence. Physical ETFs excel in providing a clear and direct link between the fund's performance and the index it tracks, offering investors a tangible and straightforward investment vehicle for gaining exposure to diverse market segments.

Related Terms


ETF Glossary is’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.