How do you choose which Exchange Traded Fund to buy?
Exchange Traded Funds (ETFs) allow investors to diversify by just buying one investment. But choosing which ETF to buy can still be pretty confusing. We’ve outlined five steps to help you decide which ETF to invest in.
If you’d like to first learn more about ETFs click here.
Deep, deep dive
- Step 1: Figure out what ETFs work best for your risk appetite
- Step 2: Look at the types of investments (or the index) that the ETF tracks
- Step 3: Look at past performance: what returns have the ETF produced?
- Step 4: Look at past performance: how well has the ETF tracked the underlying index? (the closer the difference is to zero, the better!)
- Step 5: Be careful about fees
- Step 6 (Optional): Once you’ve selected a few options based on steps 1-5, check that the NAV of each unit is close to the market price