How we screen ETFs

Our ETF screening process starts with a full list of all available ETFs in the category or categories we are interested in. From there we look at:

• Fees We look at fees for the fund relative to similar funds.  Obviously, the lower the fees the better but fee is not the only selection criteria.

• Total assets in the fund We look for funds with over $50 million in assets.  Anything less than $50 million is probably not profitable to the company behind the ETF and therefore the ETF may not be around long.

• Percentage assets in the top ten holdings This is important for a diversification standpoint.  The lower the percent the better.  There are some funds though that cannot keep the number low because they have limited holdings but these are typically very specialized funds.

• Index style Not all indexes are the same.  We tend to prefer ETFs that follow passive indexes versus actively managed ETFs.  Our preference for passive indexes is due to our belief that active managers tend not to out perform their benchmarks and charge higher fees for such under performance.

• Returns We look at each fund’s performance not only relative to other funds in the category but how well each fund has performed in up and down markets.  More weight is given to a fund that out performs in down markets.

• Tracking Error How closely a fund tracks its respective index is very important.