Physical ETF, unlike Synthetic ETF, tracks an underlying index by selecting shares from within the underlying index through a full replication technique or a partial, sampling technique.

Most of these ETFs directly buy all the assets needed to replicate the composition and weighting of their benchmark (eg constituents of a stock index). However, some only buy a portion of the assets needed to replicate the benchmark or assets which have a high degree of correlation with the underlying benchmark but are not part of it.

Some physical ETFs with underlying equity-based indices may also invest partially in futures and options contracts.

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