*ETFs trading: countries: France, Poland, Belgium, Portugal, Netherlands, Germany, Italy, Luxembourg
Before we get into the ongoing charges, it's important to understand the market price and Net Asset Value (NAV) of an ETF.
Market price: The price at which an ETF is currently trading on the stock exchange is referred to as its market price. Like specific stocks, it is impacted by supply and demand interactions. The market price may change throughout the trading day depending on investor sentiment, trading volume, and changes in the value of the underlying assets of the ETF.
Net Asset Value (NAV): An ETF's NAV is calculated by dividing the total value of its underlying assets, minus any liabilities, and divided by the number of outstanding shares. In basic terms, it is the value of the holdings per share of the ETF. Indicating the intrinsic value of the ETF based on the value of its underlying assets, the NAV is calculated at the end of each trading day.
Keeping those two concepts in mind, let's take a closer look at the ongoing charges shown on the ETF's instrument details page. The ongoing charges refer to the ETF's Total Expense Ratio (TER), which is the annual percentage of the ETF's NAV that goes towards covering the fund's operating costs. These expenses usually include management fees, administrative costs, custodian fees, and marketing costs.
For example, if an ETF has a TER of 0.50%, it means that 0.50% of the ETF's NAV is used to cover operating expenses each year. As a result of the ongoing charges, the value of the ETF's underlying assets will gradually decrease by this percentage each year.
Please note that the ongoing charges vary by ETF, and the app will display the exact percentage charge for the specific ETF under the "Ongoing charges" section on its instrument details page.