ETF Guide
How exchange-traded funds work and how to use the screener to find the right one.
What Is an ETF?
An exchange-traded fund (ETF) is a basket of securities — stocks, bonds, commodities, or other assets — that trades on a stock exchange just like a single stock. When you buy one share of SPY, for example, you're getting a proportional slice of 500 large-cap U.S. companies.
ETFs combine the diversification of a mutual fund with the real-time tradability of a stock. Most are passively managed — they track an index and simply hold whatever is in that index — which keeps costs extremely low.
Asset Classes
Every ETF belongs to an asset class — the type of underlying security it holds. The screener lets you filter by class to narrow your search.
Holds shares of publicly traded companies. The largest and most liquid category. Sub-types include broad market (VTI, SPY), sector (XLK, XLE), international (EEM, IEFA), factor (MTUM, QUAL), and dividend (VYM, DVY) ETFs.
Holds bonds — government, corporate, municipal, or mortgage-backed. Key dimensions: duration (short vs. long), credit quality (investment-grade vs. high-yield), and issuer type (Treasury vs. corporate). Examples: AGG, BND, TLT, HYG, LQD.
Tracks physical commodities or futures — gold, silver, oil, agriculture, broad commodity baskets. Note: most commodity ETFs hold futures contracts, not the physical asset, which creates roll costs over time. Examples: GLD, SLV, USO, DBA.
Holds REITs (real estate investment trusts) — companies that own income-producing properties. Offers real estate exposure without direct ownership. Examples: VNQ, SCHH, RWR. Sensitive to interest rates.
Covers strategies outside traditional stocks and bonds: volatility (VXX), merger arbitrage, managed futures, multi-asset, long-short. Often used for portfolio hedging or return streams uncorrelated to equity markets.
Provides exposure to foreign currencies relative to the U.S. dollar, or to a basket of currencies. Used to hedge currency risk in international portfolios or to speculate on exchange rate movements. Examples: FXE (Euro), FXY (Yen).
Key Metrics Explained
The total market value of all assets held by the ETF. Larger AUM generally means better liquidity, tighter bid-ask spreads, and lower risk that the fund shuts down. As a rule of thumb: below $50M is small (watch for closure risk), $500M+ is well-established, $10B+ is institutional-grade.
The annual percentage fee deducted from the fund's assets to cover operating costs. It compounds silently over time — a 1% fee on a $10,000 investment costs ~$1,000 over ten years at flat performance. Passive index ETFs typically charge 0.03%–0.20%; actively managed or niche ETFs can charge 0.50%–1.50%+.
How many individual securities the ETF owns. A broader fund like VTI holds 3,700+ stocks — maximum diversification. A sector ETF like XLK might hold 60. A concentrated thematic ETF might hold 20–30. Fewer holdings means more idiosyncratic risk — individual positions can move the fund significantly.
The per-share value of all assets in the fund divided by shares outstanding, calculated at end of day. The market price should track NAV closely thanks to the arbitrage mechanism described above. A persistent premium or discount can signal illiquidity in the underlying holdings.
Older funds have longer track records and are often more established with deeper liquidity. Be cautious of very new funds (under 1–2 years) in niche themes — many launch near market peaks and are closed within a few years if assets don't grow.
Daily trading volume determines how easily you can enter and exit without moving the price. Low-volume ETFs have wide bid-ask spreads — you might pay 0.10% or more just to buy and sell. For position sizes under $50K, most ETFs with volume above 100K shares/day are fine. For large positions, focus on the highest-volume funds.
ETFs vs. Individual Stocks
| Dimension | ETF | Individual Stock |
|---|---|---|
| Diversification | Built-in — one purchase buys many securities | Single company risk; must build your own portfolio |
| Annual Cost | Expense ratio (often 0.03%–0.20% for index funds) | Zero ongoing cost (but research time has value) |
| Upside | Capped at the index or theme — can't 10× on one name | Unbounded — concentrated winners drive outsized returns |
| Research Required | Minimal — pick the right index/theme, then hold | Ongoing — track earnings, filings, management, competition |
| Tax Efficiency | High — in-kind creation/redemption minimizes capital gain distributions | You control your own gains and losses directly |
| Transparency | Holdings disclosed daily (most index ETFs) | Full visibility via 10-K/10-Q filings |
Major ETF Issuers
The three largest asset managers dominate the ETF market and collectively manage the vast majority of ETF assets worldwide.
World's largest ETF issuer. Known for broad market (IVV, AGG), factor, and sector funds. iShares ETFs are the global benchmark for institutional investors.
Pioneer of low-cost indexing. Lowest expense ratios in the industry. Flagship funds: VTI (total market), VOO (S&P 500), BND (bonds). Unique investor-owned structure keeps costs near zero.
Home of SPY — the original ETF and still the most actively traded security on earth. Also runs the sector SPDR suite (XLK, XLE, XLF, etc.) widely used by institutional traders.
Other notable issuers: Invesco (QQQ), ARK Invest (ARKK), ProShares (leveraged/inverse ETFs), WisdomTree, Schwab, Fidelity.
How to Use This Screener
Start by deciding what type of exposure you want — equity, bonds, commodities, real estate. Use the Asset Class filter to narrow to that category.
Large AUM means deep liquidity and low spread. Start here — if there's a dominant fund for your theme, it's usually worth using that one for its liquidity advantage.
Within similar funds tracking the same index, the expense ratio is often the tiebreaker. A 0.05% difference compounds significantly over decades.
Each ETF's detail page shows its top holdings, sector breakdown, 52-week range, and moving averages — everything you need to assess what's actually inside the fund before you buy.
Leveraged and Inverse ETFs
Leveraged ETFs (2×, 3×) and inverse ETFs use derivatives to amplify or invert daily index returns. They are designed for single-day trading, not long-term holding.
Due to volatility decay, a 3× fund held over weeks or months will underperform 3× the index return — sometimes dramatically. In a volatile sideways market, both the 3× long and 3× short version of the same index can lose money simultaneously. These instruments are for experienced traders with short holding periods.