Cost (TER) and size (AUM)
The TER (Total Expense Ratio) is the annual management cost, deducted automatically from the ETF's value: for an MSCI World ETF it typically ranges from 0.12% to 0.20% a year. Over 20 to 30 years, even small TER differences add up significantly. AUM (assets under management) instead indicates the size of the fund: larger ETFs (ideally above £500 million) offer better trading liquidity and a lower risk that the provider decides to close the fund.
Replication type and domicile
A physically replicated ETF actually holds the securities in the index it tracks, while a synthetically replicated ETF uses derivative instruments (swaps) to replicate its return. For beginners, physical replication is generally preferable for its simplicity and transparency. Also check the domicile: UCITS ETFs domiciled in Ireland or Luxembourg are almost always preferable for a UK investor, for reasons of tax efficiency on foreign dividends.
Accumulating or distributing
Accumulating (Acc): dividends are automatically reinvested, accelerating capital growth and deferring any tax until you sell — preferable during accumulation. Distributing (Dist): dividends are paid out periodically to your account — more suited if you want a regular cash flow, typical of the income phase.
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