Physical ETF Definition
Learn the definition of physical ETF and other ETF terminology from the etf.com glossary.
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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.
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