Here I will give you an outline of my ETF finder model. I will explain how I go about in finding and buying the best suited ETF for my investment objectives. You can buy ETF’s at almost any broker. The problem however is that the supply of ETF’s is so big today that you really don’t know where to start.
With my ETF finder system I make this process of finding and selecting the best ETF as simple and fast as possible. I will explain this ETF finder system here.
First and foremost I start with deciding in what particular market or opportunity I want to invest. Then I will find the best suited ETF for that purpose. I always work with a minimum of 2 brokers and I will look at both brokers which ETF’s match my demands. Depending on what you want to invest in you will come up with a pretty impressive list of ETF products. My first selection will be based upon the provider.
I am very cautious who I trust my money with as there are always some little crooks running around in the financial world. In the last couple of years we have seen a proliferation of ETF providers.
Despite of the fact that some providers do seem to have the exact product I am looking for and not withstanding their sometimes nice window dressing techniques in promoting their products I will always look further than only the ETF product itself.
I will not buy an ETF from either anyone with the best smile on his or her face. I will base my decision on the provider itself so I will always go to the website of an ETF provider as many brokers do not supply you with sufficient information about these providers.
My criteria in finding the right ETF
Country of origin
Not all countries do have strict laws according to providing financial products. It is by no means a coincidence that an ETF provider has chosen to locate itself in a certain country or on an exotic island.
All ETF’s that are sold in the EU should have the UCITS hallmark. But for ETF’s you buy at exchanges outside the EU this is not mandatory.
Also concerning tax regulations the country of origin may have an impact especially regarding dividend taxes. Another major concern of course is the currency the ETF is traded in as currency risks will make the investment more complex.
How big is the ETF provider?
I rather buy ETF’s from a well-known and large provider and I will only make an exception if it is not possible to buy at these large companies. If a small ETF provider is very active in a single market niche and this provider is really an insider in this particular market I will probably go for it.
My experiences tells me that if a provider has just started supplying ETF’s things will not go that fine in the first period. Even more important, historical graphs are not available. The same goes for a new ETF that has just been introduced to the market. I will not be one of the early adopters buying into these ETF’s.
In day-to-day practice I have assembled an ETF finder list with my favorite ETF providers which enables me to make swift decisions in finding the right ETF. That being said, I prefer to buy ETF’s from different providers as risk spreading remains important.
Maybe you have noticed that until now I did not speak about the costs of providers in my ETF finder method. To put it bluntly, I am not interested in lower costs of some providers. If I do not trust a provider I just do not buy. The cost of reliable ETF providers tend not to differ much so I leave this out of the equation.
Give attention to these details in finding an ETF
Most ETF’s speculate on market prices to go up but beware of some ETF’s that speculate on a decline of prices. So always check before you click to buy.
Some ETF products work with a leverage and they react much stronger than the underlying asset. Nice in case of a profit, not so nice when thing go the other way. Day traders often buy these ETF’s but in the long run these may keep you lie awake at night.
Is it a physical or synthetic ETF? I am in strong favor for physical ETF’s as the underlying asset is being hold. With shares and bonds this is easy to execute for ETF providers. With commodities this becomes a much more challenging thing to do. An ETF provider does not own a storage with barrels of oil, soya beans or iron ore.
What I always do before buying an ETF
I will always visit the website of the ETF provider prior to selecting a particular ETF. I will look into the underlying assets of the ETF and I will look at the historical graphs. I also take notice of broker volume levels of a particular ETF. The more volume a particular ETF creates the better.
SO before I buy an ETF I will always get at the bottom of this ETF and history has proven that this is a wise thing to do. In the course of time I have selected 137 ETF’s divided in 12 groups.