Physical ETFs own their underlying assets (such as shares or bonds) and divide the ownership into fund units. Unit holders are entitled to receive their share of the profits, such as the accrued interest or dividend yields. As ETFs trade on the stock exchange, you can buy and sell units as easily as shares.
To be able to track the index as closely as possible, the issuer of an ETF buys and sells shares continuously, which results in trading costs for the fund. The management fees and trading costs of ETFs are considered to be the primary factor causing a difference between the underlying asset and the ETF (called tracking error).
Besides costs, investors should compare the historical tracking error of various ETFs, because if the cheapest ETF does not track its underlying assets very well, the slightly more expensive ETFs with a smaller tracking error may provide a better return after costs. Investors should also decide whether they want an ETF that pays out its dividends or an ETF that reinvests them. If you prefer a cash flow, you should choose an ETF that pays out dividends. If you want to benefit from the effect of compound interest, you should choose an ETF that reinvests its dividends.