ETF Investing Glossary
Updated Reviewed quarterly
19 terms every NZ ETF investor encounters — explained in plain English, with NZ-specific context where it matters.
Concept
What is an ETF?
A basket of investments that trades on a stock exchange like a single share.
AUM
Assets Under Management — the total dollar value of a fund.
NAV
Net Asset Value — the per-unit value of a fund’s underlying holdings.
Beta
How much a fund moves relative to a benchmark; 1.0 = market, 1.5 = 50% more volatile.
Cost
Expense ratio
The annual fee charged by a fund manager, expressed as a percentage of fund assets.
MER
Management Expense Ratio — same concept as TER, the term Australian and NZ fund managers prefer.
Expense-ratio compounding
How a 0.5% annual TER gap compounds to 25%+ of final portfolio value over 30 years.
Bid-ask spread
The gap between buy and sell prices on an exchange — small for liquid ETFs, wider for thin ones.
Income
Risk
Tracking error
How closely an index ETF follows its benchmark — usually a few basis points per year.
Drawdown
The peak-to-trough decline in value during a falling market.
Leveraged ETFs
3x daily-rebalanced products like TQQQ, UPRO, SOXL — decay over multi-day holds.
Volatility ETFs
VIX-futures products like VIXY and UVXY — severe contango decay; tactical hedging only.
NZ Tax
PIE fund
NZ Portfolio Investment Entity — taxed at your Prescribed Investor Rate (max 28%), no FIF rules.
FIF
Foreign Investment Fund — NZ tax regime that applies to overseas-share holdings above NZ$50,000 cost-basis.
De minimis (FIF)
The NZ$50,000 cost-basis threshold below which FIF rules don’t apply.
