These 20 graphs form a pictorial essay of a company’s financial statements. This large company survived the Recession of 2007-8!
Copyright © 2017 Douglas R. Knight
Investing in an exchange-traded fund (ETF) begins with screening many funds to identify a few candidates, then rating the candidates. My preferred open-source screeners are XTF.com and ETF.com, both of which have inclusion criteria for selecting desirable ETFs and exclusion criteria for rejecting undesirable ETFs. Aim to find a reputable low-cost ETF that best matches the performance of its category.
Assets are potential sources of income to investors. Consequently, an asset class is a group of assets that earn income the same way. The ETF portfolio holds assets consistent with the fund’s investment strategy, which is either to copy a market index by process of passive management or compete with a market index by process of active management. The index measures the performance of an asset market.
Competing ETFs are typically grouped in one of the following asset classes:
The following inclusion criteria direct the search for reputable candidate funds desired by most individual investors:
Refine your inclusion criteria by selecting reputable indices and desired market categories.
The following criteria should be excluded by all but the most adventurous investors!
All ETFs compete on the basis of an Index they use to design an investment portfolio. Some Indices make better measurements of market performance than others. Beware that some Indices measure untested markets. Generally speaking, the best-in-class ETFs use reputable market indices. One way of choosing a reputable index is by selecting a long-standing, oft-quoted Index provider or Index name.
Index providers are companies that specialize in measuring market performance and selling the information to financial institutions. Table 1 provides a sample of reputable Index providers.
Asset Classes have unique categories. Each category may be measured in a variety of indices listed in Tables 2-4.
By now you should have several ETFs that could satisfy your investment goal. Verify that they belong to the same category, then assess their suitability based on the following critera:
It’s a good idea to review the Annual Report of your selected ETF. Your potential tax burden is determined by the ETF’s legal structure, its portfolio turnover, and your tax accountant’s hourly fees.
Copyright © 2016 Douglas R. Knight