Cost-efficiency and ease-of-use remain dominant themes in the ETF industry as investors of all walks have found themselves using this product wrapper. Everyone from active traders to buy-and-hold investors has embraced the exchange-traded product structure as the preferred vehicle when it comes to tapping into virtually any asset class. As with any financial instrument, however, with innovation also comes complexity; as a result, sorting through the growing lineup of over 1,400 ETPs can be an intimidating task for novice and seasoned investors alike [see also How To Pick The Right ETF Every Time].
Luckily, the ETF Database has developed has developed a transparent, rules-based framework for evaluating the efficiency of exchange-traded funds in the same category, helping to ease the burden of choosing a product that suits your needs [see also 101 ETF Lessons Every Financial Advisor Should Learn].
What Are ETFdb Realtime Ratings?
ETFdb Realtime Ratings are designed with simplicity in mind; each ETP is assigned a Realtime Rating, ranging from A+ to C, on each of six different metrics including Liquidity, Expenses, Performance, Volatility, Dividends and Concentration. The fund with the highest average score across all of the metrics is then rated A+ within its respective ETFdb Category. Because there is only one A+ rated ETP overall per category, investors can more easily narrow down the list of viable instruments. ETFdb Realtime Ratings are also included on a separate tab on every ETFdb Category page as well as ETFdb types pages, allowing for quick comparison of products with similar investment objectives; for example, see Value ETFs and Small Cap ETFs.
Also try out our newest tool, the ETF Analyzer, which allows for easy comparisons between potential ETF investments on a wide range of criteria, including everything from expenses to holdings and volatility to dividends [see also 45+ All-ETF Model Portfolios].
Under The Spotlight
When searching for potential investments, many will fall into the pitfall of simply opting for the biggest and most popular fund in the space without taking a good hard look under the hood. While this approach ensures your product of choice will likely be very liquid, it features a number of drawbacks that could end up hurting your bottom-line returns over the long-haul. As such, below we take a closer look at three ETFs which boast A+ ETFdb Realtime Ratings in their respective categories, but don’t necessarily command the most assets in the space:
- PowerShares KBW High Dividend Yield Financial Portfolio (KBWD, A+): This ETF boasts the highest overall rating in the Financial Equities ETFdb Category and offers exposure to roughly 40 high-yielding U.S. financial companies. What’s surprising is that KBWD doesn’t fall into the top ten list of ETFs in the space when comparing total assets under management. Active traders who value liquidity above all else may prefer XLF, while those looking for the most well-rounded portfolio of holdings should consider VFH.
- WisdomTree MidCap Dividend Fund (DON, A+): This ETF is rated A+ within the Mid Cap Value Equities ETFdb Category, making it a viable option for those looking to diversify their portfolio’s equity component while also beefing up current returns. From a sector breakdown perspective, DON is tilted towards real estate and financials equities; the next biggest chunks go to the utilities and consumer cyclical sectors. Cost-conscious investors who are looking to minimize expenses over the long haul ought to consider VOE as a viable alternative.
- Van Eck Market Vectors-Intermediate Municipal Index ETF (ITM, A+): With two dozen offerings in the National Munis ETFdb Category, some might be surprised that ITM boasts the highest overall Realtime Ratings as it ranks 8th by total assets under management. Yield-hungry investors should take a closer look at HYD while those who want the cheapest offering in the space need look no further than SMB.
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Disclosure: No positions at time of writing.