In our previous What The Finance “Basics” articles we mentioned a few terms in passing without going any deeper. Now, it is time to clear them up. We start with the most frequent one: ETF -what is it? It’s a “ready-made basket” holding dozens or hundreds of stocks and/or bonds together; you buy some units of it and get a small slice of everything inside. So, check below, eight core concepts:

1. ETFs

An ETF (Exchange Traded Fund) is bought and sold on an exchange like a share, but in essence it is a basket of investments. It is a passive investment: there is no expert picking stocks -the ETF simply tracks an index, such as the S&P 500 (the market-cap-weighted index of the 500 leading US companies). That is why it is a relatively inexpensive investment. The practical takeaway for juniors: a single investment can provide diversification. But careful: “diversified” and “cheap” don’t mean “safe,” because in essence you are following the performance of an entire market.

2. Present and future value

Future value is where your money ends up if it does in fact deliver a return. Present value is the reverse: what money you’ll receive in the future is worth today. Two hypothetical numbers: €100 a month for 20 years at an average return of 7% becomes roughly €52,100 (your own deposits: €24,000). And in reverse, €10,000 you’ll receive in 20 years, with 3% inflation, is worth about €5,540 today. That second number is why money left idle isn’t a neutral choice: it doesn’t remain the same, it quietly declines.

3. Explicit and implicit value

Explicit costs are stated somewhere: commissions, the ETF’s annual management charge (TER: Total Expense Ratio), the cost of currency conversion. Implicit costs appear on no receipt, but you pay them: the gap between the buying and selling price (the spread), the ETF’s drift from its index, and above all opportunity cost (the “cost” of the second-best alternative you left behind. Every time you make a financial or personal decision, you choose one thing and simultaneously reject another). Hypothetically: €5,000 left idle for 5 years, when it could have been earning 5%, “cost” roughly €1,380. And to see how much cost matters: €10,000 at a 7% gross return over 20 years ends up at roughly €37,280 if you pay 0.20% a year, and roughly €29,180 if you pay 1.50%.

4. Investment tax

One word in an ETF’s name changes the outcome more than most other criteria: UCITS (Undertakings for Collective Investment in Transferable Securities -ΟΣΕΚΑ in Greek). It is the European regulatory framework, and under Article 103 of Greek Law 4099/2012, unitholders’ gains from UCITS authorised in Greece or in another EU/EEA state are exempt from tax -both the capital gain (the profit that arises when you sell an asset at a price higher than the one you bought it at) and the distributions. Two points that confuse many people: what matters is the fund’s domicile, not the market it invests in, and a tax exemption does not exempt you from the obligation to file a tax return. You will find the UCITS label in the official name and in the KID/KIID document. Legislation changes, and it is wise to consult a certified professional first. For any questions on tax matters, we recommend you consult your own tax adviser.

5. Amortization

The Greek word for it, απόσβεση, comes from the ancient verb αποσβέννυμι, meaning to extinguish. With a loan, you gradually extinguish the debt. The essential point: your instalment is fixed, but its composition changes. At the beginning you are mostly paying interest; by the end, mostly principal. Example: a €10,000 loan, 5 years, 8% interest. The instalment is about €202.76 a month. In the first instalment, only €136 goes toward your debt and €67 to the bank. By the final payment , almost the entire installment goes to the debt. In total you will pay roughly €12,166 to borrow €10,000. This is why early repayment saves significantly more interest when made earlier in the loan term rather than later.

6. Depreciation

In Greek, both of these are called απόσβεση. In English they are two different words, because they are two different things: with amortization you extinguish a debt; with depreciation you extinguish the value of a thing that wears out. A €1,200 computer that will last 4 years “loses” €300 of value a year. Why does this concern you? First, because it explains that a company’s accounting profit is not the same as its cash. Second -and more practically- because your car, your phone and your equipment are not investments. They are assets that lose value over time, whereas an investment expects precisely the opposite.

7. PSD2, open banking and your data

PSD2 is the European payment services directive that established something simple but radical: your banking data belongs to you, not to the bank. With your own explicit consent, you can allow a licensed provider to “see” your accounts or to initiate payments on your behalf. That is open banking, and it is the reason an app can show you all your banks on a single screen. Two rules: consent is given and is revoked by you at your own discretion (whenever you wish that is), and the provider must be licensed and supervised. If anyone ever asks you for your e-banking credentials “in order to connect,” that is not open banking. It’s a fraud.

8. Hedging and comovement

Two concepts we promised in the article about portfolios.

Hedging: you hold something that moves in the opposite direction, so that it absorbs the other’s losses – such as an ETF hedged on the foreign exchange market, which neutralises the risk of a moving exchange rate. It isn’t free: it carries a cost that you pay whether it helps you or not.

Comovement: how much two investments move together. This is where the most common junior illusion hides: three different ETFs don’t mean triple the diversification. If one tracks a global index, another a US index and the third technology, the same enormous companies dominate all three. Global developed-market indices have in recent years carried a US weighting of around 70%.

Do remember: Diversification isn’t how many products you hold, but how differently they behave when things go wrong.