Choosing an ETF

How to evaluate an ETF to trade

Choosing an ETF
Choosing an ETF

ETFs, like stocks, are accessed on exchanges, through a brokerage account— that is, via financial advisers or institutional sales teams of registered broker/dealers or through on-line transaction services. Trading is one of the largest differences between ETFs and open-end mutual funds, which are purchased and sold once a day at the closing net asset value of the fund holdings.

An ETF has the advantage that it can be purchased whenever  exchanges are open—as well as at closing NAV when a transaction is large enough to qualify for a creation or redemption.

As with all exchange-traded products, ETF investors usually need to pay a commission, however, and incur a trading cost related to the liquidity factors associated with the ETF.

Since 2007 in the United States, ETFs have consistently represented between 15% and 25% of the total dollar value traded when aggregated with equity trading activity.

The 10 largest ETF in volume and AUM are:

  1. SPY – SPDR S&P 500 (US stocks)
  2. IVV Ishares Core S&P 500 (US stocks)
  3. EFA iShares MSCI EAFE (Europe Australasia and Far East)
  4. QQQ Powershares QQQ (Nasdaq 100 trading index)
  5. VWO Vanguard FTSE emerging markets (Emerging markets)
  6. VTI Vanguard Total Stock Market (US Total stock market)
  7. GLD SPDR Gold (Gold bullion)
  8. EEM IShares MCSI Emerging markets (Emerging Markets)
  9. IWM iShares Russell 2000 (Small cap & Mid Cap US Stocks)
  10. IWF iShares Russell 1000 Growth (US Stocks, mid/small cap)

 

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