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Are they cheap to own? Are they liquid? Do they minimize trading costs? Do they maintain risk-reducing diversification benefits?īeing in the bottom half of the list doesn't automatically make a fund "bad". I'm ranking ETFs based on more basic structural factors. ETFs shouldn't be penalized for low returns simply because the index they're tracking is out of favor at the moment. Most ETFs are passively-managed and are simply trying to track an index, not outperform. One thing that is not considered is historical returns. There are a few other minor factors thrown into the mix, but these are the main factors considered. I'm not going to copy and paste that work that they're doing, but there is some influence there to make sure my rankings are on the right path. They basically are designed to tell us if an ETF is doing what it sets out to do.
![ishare small cap value etf ishare small cap value etf](https://specials-images.forbesimg.com/imageserve/5f8dd62eb0c93cd4f680dcb4/960x0.jpg)
Considering expense ratios and spreads together usually give you a better idea of the total cost of ownership. On the other hand, small funds tend to trade fewer shares and investors often need to pay a premium to buy and sell. Therefore, it's easier to find shares to transact and that makes them cheaper to trade. Bigger funds usually have many buyers and sellers. Generally speaking, the larger the fund, the lower the spreads. Spreads - This relates to how cheaply you can buy and sell shares.Lower expense ratios equal more money in your pocket. You can't control what a fund returns, but you can control what you pay for the portfolio. If you choose a fund that charges 0.1% annually over a fund that charges 1%, you're automatically coming out ahead by 0.9% annually. Expense Ratio - This is perhaps the most important factor since it's the one thing investors can control.Second, let's run down the factors I used in the ranking methodology. Many thanks to them for opening up their vast database for my use. There are many that qualify and we'll be using their categorization as a starting point. They have gone through the ETF universe to identify and categorize those ETFs used here.
![ishare small cap value etf ishare small cap value etf](https://s32566.pcdn.co/wp-content/uploads/2020/10/Small-cap-value-chart-Oct-20_opt.jpg)
First, all of the data is used is coming from ETF Action.