We recommend using ETFdb.com when searching for and scrutinizing ETFs. Not only does it offer a free database with detailed information on over 2,000 ETFs around the world, but there’s an easy-to-use screening tool.

The first filter to apply in the ETF screening process is asset class. Are you looking for ETFs that track equities (a.k.a. stocks)? Bonds? Commodities? You can get even more granular by filtering by sub-asset class – focusing, for example, only on ETFs that track agricultural commodities, or those which invest in emerging-market bonds.

With equities ETFs, you can apply further filters based on company size (large-cap, small-cap, etc), investment strategy or style (e.g. value, growth, low volatility), region, and sector. By way of example, here’s what a screen for ETFs tracking small-cap US growth stocks throws up:

Picking and choosing ETFs

Once you’ve got such a shortlist of ETFs, the next question is obvious: which do you pick? A good place to start is the ETFs’ liquidity: how easy it is to buy in or sell out without causing big shifts in price (or paying too much in trading costs). If you’re presented with multiple ETFs tracking the same thing, it’s a good idea to narrow things down to the most liquid. 💧

You can compare liquidity using the “total assets” and “average daily volume” columns in the screener. Looking at the screen above, we can see two ETFs – VBK and IWO – each have around $10 billion in total assets, while the rest are all below $1 billion. On an average day, 250,000 shares of VBK change hands, most recently at a price of $210 per share. With $50 million worth traded every day, that’s one liquid ETF…

Another important factor is the ETF’s cost, as measured by its “expense ratio.” To see this in the screener, tap the Expenses tab:

We’ve already narrowed our screen down to VBK and IWO based on liquidity, so let’s compare these two on cost. At 0.24%, IWO’s expense ratio is more than three times higher than VBK’s – so it’s a bit of a no-brainer. If looking to get exposure to small-cap US growth stocks, we’d probably pick VBK. Not only is it very liquid, but it’s also the cheapest ETF out of the bunch. ✅

Other tips when screening for ETFs

What else should you look at when screening for ETFs? If you’re looking to track overseas stocks or bonds, you might find that some ETFs – like this European fund – promise to hedge (i.e. remove) foreign currency risk. There’s no right or wrong answer, but more conservative investors generally lean towards currency-hedged ETFs. 🌍

Another thing to think about is how accurate an ETF is at tracking whatever it’s meant to track. Let’s take a look at two gold ETFs, for example – GLD and DGL:

GLD tracks the price of gold by physically buying gold bars – which is probably preferable to DGL’s purchases of gold futures. Because futures contracts have expiry dates, the ETF has to constantly reinvest its funds into newer contracts – and that process can cause the performance of the ETF to deviate from the performance of actual gold.

Last but not least, when it comes to equity ETFs in particular it’s worth looking at the ETF’s holdings to make sure it’s not overly concentrated on just a few investments. On ETFdb, you can do this by clicking on the Holdings tab. A quick glance at, say, VGT – which purports to track the US information technology sector – reveals that almost 40% of the ETF is invested in just two stocks! By owning VGT, you’re making a bigger bet on Apple and Microsoft than on the wider tech sector.

Looking at an ETF’s holdings can also, of course, help you find individual stock ideas. Let’s say you’re interested in picking up a couple of renewables companies. On the ETFdb screener, filter for equity ETFs and under Sector, select Clean Energy. This throws up 8 ETFs; clicking on one of them and then exploring its Holdings should help you compile a nice little list of solar and wind energy stocks.

You can do the same thing with thematic ETFs to track down stocks exposed to certain trends. Top-down investors, naturally, may want to invest in the ETFs themselves to gain more diversified exposure. iShares and Global X are two of the biggest providers of such investments. Remember – if you spot an ETF that you like the look of, do check its holdings on ETFdb to ensure it’s not too narrowly focused.