What is the criteria when pulling a decent fund from ETF screener? What are the factors when choosing an ETF that can lower risk?
Are morningstar ratings solid reference?
What to look for when selecting an ETF fund?
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2 Comments
Morningstar ratings are a good way to evaluate funds. Also look at holding percentages. Look at the top holdings of the fund.
As far as risk reduction — avoid emerging market funds, industry specific funds, small cap and micro cap funds, etc.
If you are going to buy ETF’s buy those with high trading volume and low price spreads between bid ask. You can take a real beating if you have to sell the shares of thinly traded ETF’s. Also the broader the holdings the lower the risk. Look for low expenses. I would avoid sector funds in ETF’s you would be better off in a closed end fund of a traditional open end mutual fund.
The only two ETF’s I can recommend are SPY and IWM.
I have a low opinion of morningstar. I bought a five star fund they recommended back in 2000 and it lost 95% of it’s value. AMCC was a 5 star stock with them when it was over $100 per share. Today it is selling less than $3.