Basis Point Definition

Learn the definition of basis point and other ETF terminology from the etf.com glossary.

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Reviewed by: etf.com Staff
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Edited by: etf.com Staff

Learn more about Basis Point

A basis point (BP) is a unit of measure used to express small changes in the value of an ETF or the performance of its underlying assets. It represents one-hundredth of one percent (0.01%). Basis points are commonly used to describe changes in interest rates, bond yields, and ETF expense ratios. For instance, if an ETF's expense ratio increases from 0.25% to 0.26%, this change would be expressed as a 1 basis point increase. Similarly, if an ETF's net asset value (NAV) decreases by 0.10%, this would be represented as a 10 basis point decline. Basis points are a convenient way to express small changes, particularly when dealing with percentage values. They allow for more precise and nuanced comparisons between different ETFs or their underlying assets.

Related Terms

Expense Ratio, Net Asset Value (NAV)

ETF Glossary is etf.com’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.