Ignoring the triple leveraged bull and bear ETFs which are speculation pure and simple, ETFs are index funds that trade like shares, the name says it: “Exchange Traded Funds.” Their price (or value) tracks the net asset value (NAV) of the stocks in the index by which I think they really mean the price of the stocks, not the stock’s NAV.
other than past performance (insert safe harbor here)
I wish I could invest based on future performance! All we ever have, or had, or will have – until we invent and perfect time travel – is PAST PERFORMANCE. Why then do they always insert that stupid safe harbor? It’s just a protection against ambulance chasing lawyers who will sue based on the flimsiest of excuses like saying that you had a good year and some dumbarse taking that to mean that it was a guarantee of a good coming year. Why that insurance against lawyers has taken on the mantle of divine inspiration is beyond me.
The only guide we have is the past because we can’t see the future. Track economic forecasts if you don’t believe me.
Instead of tracking companies you have to track the industry or the sector the ETF is invested in. The only way I know of doing this is by tracking the long term performance of the index vs. market indexes or against a target growth rate (CAGR). To pick the two technology ETFs I started with 40 or 50 ETFs and began a process of elimination. Get rid of:
- Not enough history
- Not enough volume (liquidity)
- Too low a NAV
That should get rid of more than half
My next step is to compare growth rates (the longer the better) and to discard the low growth ETFs.
Now it gets more personal. There might be competing ETFs, say two or there in semiconductors. Check the management fee, the number of stocks in the ETF, and so on. Make sure to visit the ETF’s webpage, not Yahoo, but the issuer.
My final two technology picks were an S&P semiconductor ETF. Semiconductors are going to be the hardware of high tech for decades to come
The SPDR® S&P® Semiconductor ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Semiconductor Select IndustryTM Index.
and a small cap information technology ETF which combines “small cap” with “IT.”
The PowerShares S&P SmallCap Information Technology Portfolio (Fund) is based on the S&P SmallCap 600® Capped Information Technology Index (Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index is designed to measure the overall performance of common stocks of US information technology companies. These companies are principally engaged in the business of providing information technology-related products and services, including computer hardware and software, Internet, electronics and semiconductors and communication technologies.
My last piece of advice is to buy a position over a length of time, maybe a year, by dollar cost averaging unless you find an incredible bottom like 2009.
(insert safe harbor here) LOL