Twelve Things You Need to Know About ETFs

By Ben Steverman - 2012-02-27T22:16:37Z

Illustration by Dennis Pacheco

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Why might two similarly named ETFs perform differently?

ETFs with similar names or objectives can provide very different returns. Even ETFs based on the same index can perform differently. The reason: Some ETFs hold a broad sampling of an index rather than hold every security in it, a process called "optimization" that can lower expenses but skew results. "A small difference in a weighting of one stock can make a big difference in return," says Bloomberg ETF analyst Eric Balchunas.

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