Evaluating investors' favorite asset: 3 tips for looking under the ETF hood

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Evaluating investors' favorite asset: 3 tips for looking under the ETF hood

Postby N.Nicholas » Thu Jun 08, 2017 6:28 am

These Exchange-Traded Funds are predicted to continue sweeping up assets in 2017, just like in 2016, where it recorded $288.6 billion of inflows and closed the year with nearly $3 trillion in assets under management.

If you are looking to be a part of this, here are some key steps all investors should take when evaluating ETFs:

1) First, decide if you are going to be a do-it-yourself investor or work with an advisor. As their name suggests, ETFs are traded on exchanges, so they can be bought and sold like stocks through a brokerage.

2) Whether or not you use an advisor, make sure you understand the index underlying the ETF you are considering. Focus on how the index is constructed, what it tracks and how long it has been around — a longer record will reveal how the index responded to different market conditions.

3)Also ask about the fund's underlying holdings, as well as any tax considerations. An advisor won't necessarily have all the answers to your question, but he/she should have resources available to give you some guidance.

Source: http://www.cnbc.com/2017/06/07/3-things-investors-should-know-when-buying-etfs.html

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