Choosing the right ETF | BlackRock (2024)

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Choosing the right ETF | BlackRock (2024)

FAQs

How to choose the right ETF? ›

Before purchasing an ETF there are five factors to take into account 1) performance of the ETF 2) the underlying index of the ETF 3) the ETF's structure 4) when and how to trade the ETF and 5) the total cost of the ETF.

How do you evaluate which ETF to buy? ›

The key liquidity factors are:
  1. The underlying securities of the ETF - highly tradable are better.
  2. Fund size - larger tends to be better.
  3. Daily trading volume - more tends to be better.
  4. Market makers - more is better.
  5. Market conditions - liquidity can decline when the markets are very volatile.

How do you know if an ETF is doing well? ›

Since the job of most ETFs is to track an index, we can assess an ETF's efficiency by weighing the fee rate the fund charges against how well it “tracks”—or replicates the performance of—its index. ETFs that charge low fees and track their indexes tightly are highly efficient and do their job well.

How many ETFs is enough? ›

"You can get broad-based diversification with one ETF, commonly referred to as diversified ETFs, or you can build a portfolio of five to 10 ETFs that would offer good diversification," he says. The choice you make on the above depends on your investment goals and risk appetite, like any investment.

What are the top 5 ETFs to buy? ›

7 Best ETFs to Buy Now
ETFExpense RatioYear-to-date Performance
Global X Copper Miners ETF (COPX)0.65%26.2%
YieldMax NVDA Option Income Strategy ETF (NVDY)1.01%12.9%
iShares Semiconductor ETF (SOXX)0.35%14.9%
Simplify Interest Rate Hedge ETF (PFIX)0.50%22.9%
3 more rows
May 7, 2024

How to judge ETFs? ›

The two ways to see how closely an ETF matches the index performance are 'tracking error' and 'tracking difference'. Tracking difference addresses how closely the ETF tracks the index returns, while tracking error reflects how consistent over time the tracking quality is.

How do I know when to buy ETFs? ›

Generally speaking, the best time to trade ETFs is closer to the middle of the trading day rather than the beginning or end.

What is the best ETF to buy and hold? ›

  • Vanguard S&P 500 ETF (VOO)
  • Schwab U.S. Small-Cap ETF (SCHA)
  • iShares Core S&P Mid-Cap ETF (IJH)
  • Invesco QQQ Trust (QQQ)
  • Vanguard High Dividend Yield ETF (VYM)
  • Vanguard Total International Stock ETF (VXUS)
  • Vanguard Total World Stock ETF (VT)
Apr 24, 2024

How do you know if an ETF is growth or value? ›

Growth ETFs may have higher long-term returns but come with more risk. Value ETFs are more conservative; they may perform better in volatile markets but can come with less potential for growth.

What is the downside to an ETF? ›

The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.

Is it smart to just invest in ETFs? ›

If you're looking for an easy solution to investing, ETFs can be an excellent choice. ETFs typically offer a diversified allocation to whatever you're investing in (stocks, bonds or both). You want to beat most investors, even the pros, with little effort.

How long should you hold an ETF? ›

Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.

How many S&P 500 ETFs should I buy? ›

SPY, VOO and IVV are among the most popular S&P 500 ETFs. These three S&P 500 ETFs are quite similar, but may sometimes diverge in terms of costs or daily returns. Investors generally only need one S&P 500 ETF.

Is 20 ETFs too many? ›

How many ETFs are enough? The answer depends on several factors when deciding how many ETFs you should own. Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.

How much of my portfolio should be in ETFs? ›

"A newer investor with a modest portfolio may like the ease at which to acquire ETFs (trades like an equity) and the low-cost aspect of the investment. ETFs can provide an easy way to be diversified and as such, the investor may want to have 75% or more of the portfolio in ETFs."

Is Vanguard or Fidelity better for ETFs? ›

Both Fidelity and Vanguard have a wide variety of low-cost mutual funds and ETFs. If you're simply looking at the options offered by each firm, Fidelity has more options available.

Is it better to invest in one ETF or many? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

What are the three best ETFs? ›

3 Top ETFs for a Diversified Stock Portfolio
  1. SPDR S&P 500 ETF Trust. The SPDR S&P 500 ETF Trust (SPY 0.66%) mirrors the S&P 500 Index, encompassing 500 of the largest U.S. corporations. ...
  2. Invesco QQQ Trust. ...
  3. iShares Russell 2000 ETF.
May 12, 2024

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