Courtesy of ETFdb.comA typical ETF screening tool.
You won’t find minimum and maximum with ETF screeners as much as with stock screeners. There are more varied categories to filter through and different performance criteria. The following sections cover the main categories.
Keep in mind that most of the popular financial sites (such as Yahoo! Finance and MarketWatch) have good ETF screeners (as well as stock screeners); most of the stock brokerage sites have search and screening tools as well. Some other popular sites that have ETF screening tools include the following:
- com
- ETF Database; you see this screener in the figure
- ETF Screen
Asset class
Choosing your asset class is the first search criteria, and of course in a book like this, the focus is stocks (equity). However, this category shows the range of choices that ETFs have to offer. There are ETFs that concentrate on bonds, currencies, precious metals, real estate, basic commodities, or “multi-asset” portfolios. There are also inverse ETFs, which have within their portfolio speculative derivatives such as put and call options (found in the asset category called “alternatives”).Attributes
In the Attributes category in the ETF Database tool, you can choose Active, Passive, or Any. ETFs, by and large, are passive, meaning that the portfolio isn’t actively managed like a typical mutual fund portfolio. However, in recent years some ETFs have become more active in their portfolios (meaning more active buying and selling of positions within the portfolio). If you aren’t sure, just click Any as your choice.
Issuer
Looking for an ETF that was issued by a financial institution such as iShares, State Street SPDR, or VanEck? If the issuer is an important consideration, check out the comprehensive list of financial firms that issue and sponsor ETFs.Structure
Although you’re most likely looking for a conventional ETF, you can find other structures, such as a commodity pool or exchange-traded notes (ETNs). For most beginners, the standard ETFs are fine.Expenses and dividends
In the Expenses & Dividend category in the ETF Database screener, you can perform your search using an expense ratio and/or a dividend yield. Maybe you want an ETF with a relatively low expense ratio — say, under 2 percent. You can then adjust your search with this criteria, and the search will exclude all ETFs with expense ratios higher than 2 percent.As for the dividend yield, you can adjust it based on your preference. Indicate that, for example, you want ETFs with a minimum yield of 2.5 percent, and the screener will exclude all ETFs with a reported dividend yield lower than that percentage.
Liquidity and inception
The typical criteria in the Liquidity & Inception Date category shown in the figure are the following:
- Assets ($MM): This field measures the market capitalization of the ETF in case you want to make sure that you’re buying a large ETF versus a smaller ETF that has a lower market capitalization. For novice ETF investors, go for the higher market capitalization (larger asset size).
- Average Daily Volume: This field refers to how many shares of a particular ETF are traded in the market on a typical trading day. Novice ETF investors want a higher trading volume, which indicates greater liquidity and hence is easier to buy and/or sell.
- Share Price: Here you indicate whether you have a limit as to share price. For example, if you can afford ETFs only at $50 per share or lower, use that criteria. Easy!
- Inception Date: Here you put in the criteria, if you wish, regarding how long an ETF has been around. All things being equal, an ETF around for 15 years or longer is a safer investing vehicle to choose than one that started just last year.
Returns search criteria
Looking for ETFs based on how well they have performed over a year or longer? Then the Returns search criteria shown in the figure is for you. You can designate a time frame such as year to date or a longer one such as one year, three years, or five years.I take seriously the admonition that “past performance is not necessarily indicative of future results,” but check out the returns since they help confirm that an ETF’s portfolio is a good consideration. After all, all things being equal and you’re choosing between one ETF that went up 87 percent in the past three years and another ETF that dropped 12 percent in the same time frame, your choice should be a no-brainer (Put away that coin! No heads or tails here).
ESG scores category
Are social or other nonfinancial considerations important to you? Perhaps you’re worried about the environmental effects of corporate activity. Maybe moral considerations are important because you want to invest in companies that are “good citizens” or that do not exhibit practices you disagree with. Given that, the ESG Scores category in the figure will be a prime consideration in your search criteria.In the ETF Database screener, there is a single composite ESG score ranging from 0 to 10, with 10 being the most favorable — the higher, the better.
Fund flows
The Fund Flows metric in the ETF Database screener tracks how much money is flowing into an ETF over a given period such as one week, one year, or five years. Fund flow essentially means that when you tally money coming into and out of various financial assets, you can gauge the popularity (or unpopularity) of a given asset. If there is a net inflow of money for a given asset, then ETFs with that asset are in a bullish position (and that’s a good thing for your ETF’s share price).Risk Metrics category
The Risk Metrics category in the figure touches on volatility and beta characteristics of a particular ETF. It also includes the price-to-earnings (P/E) ratio if available. You can find out whether an ETF has lower volatility (compared to the total market) or higher.Higher volatility means ultimately greater risk. A tech stock ETF, for example, has higher volatility than a utilities stock ETF. ETFs with portfolios that have a higher P/E ratio can be riskier than those with a lower P/E ratio. The bottom line is that if you’re concerned about risk, select search criteria with low P/E ratio and low volatility.
Holdings criteria
Holdings criteria cover what asset(s) are in an ETF. Does the ETF have one asset or 50? In addition, this category covers how balanced and deep an ETF is relative to its peer group. In other words, is this ETF’s holdings in the top 10 percent, 15 percent, or 50 percent of their peers in the category?Themes
You can see the top ETFs in terms of popular themes in the final category in the figure. At the time of writing, the most popular themes are artificial intelligence, blockchain, marijuana, and FAANG (referring to Facebook, Apple, Amazon, Netflix, and Google).The problem here is that what is popular today may not do well next year, so novice investors should focus on long-term profitability and the fundamentals for more assured success over time.