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Want to find the right ETF for you?
There are plenty of ETF options out there, so we’re here to help you sort through them and figure out what strategies might work best for you.
First, when choosing an ETF, you should factor in your individual needs, your goals, your financial status and more.
There are many important questions to ask yourself when considering ETFs:
First, what are your investment goals?
For example, if you have long-term investment goals, you may want to lean towards a broad-based market index.
Whereas, if you’re looking to capitalise on a unique market opportunity, you might want to look into an actively managed ETF.
Next, you’ll want to evaluate who actually manages the fund.
ETFs are managed by asset management companies that have their own investment strategies and risk philosophies.
We strongly suggest that you actually do your own detective work on both the asset management company and the individual portfolio managers.
How long have they been around?
What are their total assets under management, or “AUM”?
Do they specialise in certain types of ETFs?
And how accurate are their tracking results against a desired benchmark?
The answers to these questions should give you a pretty clear picture of their track record and you can find the answers to these questions on the ETF providers website and on financial websites like eToro.
Finally, let’s talk about the fees.
ETFs tend to have lower cost than mutual funds, but those costs are not necessarily zero.
An ETF’s primary cost is its expense ratio, which will typically be expressed as a percentage.
For instance, the average expense ratio across US-listed ETFs is 0.52%.
That means for every $100 invested in the average ETF, your cost as an investor would be 52 cents every year.
This doesn’t sound like much, but even the slightest difference in an expense ratio can make a big difference over the long run.
Other expenses can include annual management fees, custodial fees, or brokerage commissions.
But remember, you will not be charged for any brokerage or transaction fees on eToro.
So now you know that, to find the right ETF for you, you should first decide on your investment goals and then research the types of ETFs available, their providers, and the fees involved.
In our next lesson let’s learn about how you can start getting invested in ETFs.
eToro encourages its customers to carefully consider the funds’ investment objectives, risks, and charges and expenses carefully before investing. This and other information can be found in the funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting each fund company’s website or www.sec.gov/edgar/search. For iShares funds please visit www.iShares.com/prospectus. Read the prospectuses carefully before investing.