An ETF Selection Tool to Write Home About
I probably sound like a used car salesman when I say “Bring the value to the people.” Value in the investment world comes from saving you time and money. I have a tool that can bring savings in both to you.
In thinking about how to invest effectively, I feel the most important value comes from saving time and money. Agreed? I am informed by a past experience as a Treasurer responsible for the investments of a large NY based charity benefitting children with life threatening diseases. In looking to optimally invest the charity’s endowment, I gravitated towards ETFs.
It’s no secret that ETFs:
– Can match the exposures you want to have in the stock market, rather than taking a lot of time trying to pick single stocks
– Achieve such in a much less expensive way through lower expense ratios (saving money)
Numerous studies have shown that ETFs more than hold their own against higher paid money managers. So, avoid higher expenses, keep more of what you’ve earned and get your shot at participating in the stock markets by using ETFs. If your active money manager has consistently beat the relative passive indices, you are in a very small minority. Some would call you lucky.
You could buy an ETF that replicates the broad market; the S&P 500. There are many large ETFs in that space which seal the deal very inexpensively. The S&P covers 500 of the US’s largest companies, with roughly half of their exposure in international markets. That’s a lot of market coverage and a fair amount of diversification. You can go there easily by buying ETFs, call it a day and very likely be ahead of a lot of other investors.
For those who want more, we developed the ETF Miner because the ETFs I was seeking for my charity were hard to find! There are 2,000+ out there and they run the gamut from socially responsible investing to the tracking of base metals or your favorite tech space.
First, check the ETF Miner to see what ETFs are trending, meaning those that were most active in the recent week. If your priority is cost, find one with a low expense ratio that also meets your other goals. Is the size of the ETF important? Or, would a high priority for you be placed towards the length of time the ETF has been in existence? It’s all in there. The ETF Miner is much better than a simple screener as it is designed to point you towards what you want in a precise but yet simple way. Give it a shot and you’ll see what I’m writing home about.
Question after…question after…
When I went out to the market to find ETFs for my charity I was surprised about how much you had to know to get through the ETF screeners out there. Question after question. What’s with all the questions? Are you trying to help or confuse me?
– Do I want an ETF that’s active or passive. (What does that mean exactly? As there are now many types of ETFs out there, this is actually a tough question.)
– Currency Hedged? (I guess. Why wouldn’t I want that?)
– Leveraged? 1.25, 1.5, 2, 3, 4x. (What is the amount of leverage one should want? IDK.)
– Inverse? (This is hard enough. Do I need to pick one goes in the opposite direction of what I want? Is that one made for me? If it is a hedge, what exactly am I hedging against?)
– Commission Free? (Yes, of course. Do you have to ask that?)
– Select a structure: Commodity pool, currency pool, ETMF, ETN, Grantor trust, UIT. (What?)
– What kind of expense ratio? (How about the lowest possible)
– What kind of dividend yield and frequency. (As high and as frequent as possible)
– Liquidity. (Yes, right?)
– Returns (How about one that beats the S&P 500?)
– Select or de-select an issuer (They give you a laundry list. I want a good, US based issuer, but which one should I choose?)
There are a lot of other filter type questions with which you may have to contend. Region/Type of Market (Do you want a developed or a frontier market?), Beta, Segment, Category, Asset Class, Focus, Turnover, Price to Earnings/Book, are a couple of others. There’s more, but I’m going to stop now. Come on, guys. Even if a particular screener could list every question that could be relevant, no one can guarantee you’ll get a better result by asking about so many. Keep the selection process simple, do your research and begin the process of finding the ETF that’s right for you.
Scanners, Screeners, Analyzers. Stop the madness!!!!
By the way, the rest of the ads you see as you go through the gauntlet of a typical ETF screener questionnaire is for investment advisers. I can’t help but think that someone wants you to say ‘boy, this is tough stuff. I must really need an adviser!’
No, you’re not dumb, so there’s no need to feel that way..
The ETF Miner is a tool that brings value to its users by saving time and money with just 3 questions needed to get you going. Answer the 3, get the result(s) it provides, and see if there is an ETF presented that fits your needs.
Bringing the value to the people.
Michael Lo Bosco, Co-Founder of Threadvest
Threadvest nor the author is providing tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.