The MarketBeat ETF Screener is a useful tool that helps investors make decisions about ETFs based on their personal investment objectives. This article will help investors understand what ETFs are and how they are different from index funds and mutual funds. The article will also explain how to effectively use the MarketBeat ETF screener.
What are Exchange-Traded Funds (ETFs)?
An exchange-traded fund is a pooled investment vehicle that has some of the attributes of owning individual stocks and some attributes of owning a mutual fund or an index fund. The components of an ETF track the performance of an underlying index, sector, or group of assets. For example, an ETF may track bonds, U.S. treasuries, commodities, or an index like the S&P 500.
To many investors looking for diversification, an ETF represents the best of both worlds. That’s because of the range of options that are available. Investors get diversity not only between asset classes (stocks, bonds, commodities, etc.), but within niche asset classes (small cap, mid-cap, emerging markets, technology, oil, etc.). Owning a basket of comparable securities helps investors with a low-risk tolerance because if any individual security in the ETF is underperforming, there will typically be other securities that are moving up.
In addition to those benefits, ETFs offer the advantage of trading like mutual funds but with lower fees and higher liquidity. That combination allows them to be quickly and easily bought and sold.
How Are ETFs Different From Index Funds?
The primary differences are:
- ETFs offer more investment choices – Index funds are more restricted in their available options.
- ETFs allow different trading strategies – ETFs allow short selling and offer products such as inverse ETFs and Currency ETFs that can be used for market hedging and managing currency risk.
- ETFs have a different cost structure – Index funds can be bought and sold without transaction costs. An investor will have to pay a brokerage commission when trading ETFs.
- ETFs do not immediately reinvest dividend – Index funds immediately reinvest their dividends while ETFs continuously accumulate dividends and distribute them quarterly.
- ETFs are more tax-efficient – The in-kind creation/redemption feature means that investors are never selling securities that can trigger a tax event. Index funds trigger capital gains every time securities are sold.
- ETFs charge fees for rebalancing – If investors want to rebalance their ETF portfolio they may have to pay multiple commissions, whereas there is typically no charge for rebalancing an index fund.
- ETFs can have price volatility and restricted liquidity – Index fund investors have the assurance that they will get the end-of-day Net Asset Value (NAV). Because ETF shares can be traded like stock, there may be a wider difference between the market price and the NAV which can result in higher trading cost.
How Are ETFs Different From Mutual Funds?
The primary differences are:
- Investors can trade in and out of an ETF just like if they were trading an individual security. In a mutual fund, trades are conducted at the end of a trading day, and the selling price is based on the Net Asset Value (NAV) of the shares at the time the market closes. Shares in an ETF can be traded throughout the day. The trades are executed at the market price at that moment. This makes ETFs a popular option for active traders.
- Exchange-traded funds give traders more options. Unlike mutual funds, investors in ETFs have the ability to sell short or execute margin trading.
- A mutual fund is actively managed. This simply means that a portfolio manager is responsible for selecting which securities are part of the fund, and how those securities are weighted. Most (but not all) ETFs are passively managed meaning that the composition of the fund is based on a published index that determines which securities to hold and how much weight they will have in the ETF.
- ETFs generally have lower operating costs than mutual funds.
- ETFs provide more transparency for investors. Every ETF is required to disclose their holdings every day, so if you are buying shares in an ETF that is pegged to a particular benchmark index you will know exactly what securities comprise that index.
- ETFs offer tax advantages. The ability to trade ETFs like stocks makes them more tax efficient than mutual funds because capital gains are distributed at the time shares are bought and sold. With a mutual fund, capital gains are distributed when the fund buys and sells the securities within the fund.
How to Use the MarketBeat ETF Screener
The MarketBeat ETF screener is a useful tool that can help investors sort through more than 2,600 ETFs that exist as of the end of 2021. Here are some quick tips to help you make the most efficient use of the ETF screener.
If you know the name of the ETF
The most direct way to get to the fund you wish to view is by inputting the name of the fund in the upper left field. If you don’t know the name but know the exchange and ticker symbol, you can enter that to get to the correct ETF.
If you don’t know the name of the ETF
If you know the fund issuer (i.e. Vanguard, Fidelity, iShares, etc.) you can input that into the “issuer” field and find all the funds that are issued by that company. Alternately, you may know the administrator or advisor for the fund to find a list of funds under their control.
If you know the type of asset class you want to invest in, clicking on the tab under “Asset Classes” you can select from the common categories of ETFs (commodities, currency, equity, fixed income, multi-asset, and real estate).
If you know the index that you want the fund to use as its benchmark, you can click on the tab under “Benchmark” and select the index that matches your selection.
If you want to generate investment ideas:
Of course, the most likely reason you’re using the ETF screener is that you don’t necessarily know exactly what you’re looking for. If that’s the case, the screener allows you to input general criteria that can narrow the field to fit your investment objective.
Sort by Total Assets
For example, many ETF investors want to focus on companies with a specific size (i.e. large cap, mid-cap, or small cap). By clicking on the arrow under “Total Assets” investors can screen for funds that invest in those sized companies.
Sort by Category or Focus
Many investors use ETFs to give their portfolio exposure to a specific area (a specific currency, commodity, etc.). Investors can click on Category and/or Focus to streamline their search.
Sort by Region
One of the many benefits to having exposure to ETFs is investors can invest in international markets without having to pick individual stocks. There are many countries (such as emerging markets) that require knowledge of the country that many individual investors simply don’t possess. Investors can click on Region to select their area of interest.
Sort by Specific Financial Variables
If you only screen for one or more of the variables listed above, you’ll probably still wind up with a large list of funds to sift through. This is why many investors will choose to look at ETFs that feature specific variables:
- Discount/Premium – Like an individual stock, the price of an ETF rises and falls with the broader market. This field allows investors to sort for ETFs that are trading above or below its Net Asset Value (NAV). An ETF is trading at a discount when the price falls below its NAV. An ETF is trading at a premium when the price is above the NAV.
Investors can select the specific percentage of a discount or premium they will consider between -10% to 10%. Investors with a low risk tolerance will want to make a selection closer to 0%. Investors with a higher risk tolerance may want to choose ETFs that are trading at a higher discount or premium by percentage.
- Net Expenses: The net expense ratio lets investors know how much money they pay (as a percentage) for the fund’s operating costs. It goes without saying that investors will want to choose an ETF with the lowest percentage that still meets their investment objectives.
- Average Volume: If there’s one potential negative to ETFs it’s the fact that they can be sold short. This creates the theoretical possibility of large losses if the fund does not trade at sufficient volume (i.e. liquidity). This field allows investors to choose funds that trade at a level greater than, equal to, or less than a specific volume level.
- Current Price: Some investors prefer to buy a stock at or near a specific price point. The same can be true of an ETF. This field lets investors assign a price point that the ETF must be greater than, equal to or less than.
- Dividend Yield: Like mutual funds, ETFs will pay a dividend for their holdings that issue them. The dividend yield is calculated based on the underlying stocks that are a part of that ETF. Investors can expect that a fund’s dividend yield will closely approximate the index it follows.
Putting It All Together
As you can see, there are many ways you can use the MarketBeat ETF screener. The more focused your investment objective is, the more precise your results will be. For example, if you’re looking for an ETF of small-cap stocks with an expense ratio of 1.5% or less you may come up with around 11 ETFs to consider.
However, if you change your screening criteria to add ETFs with a dividend yield of above 3%, you get a list of just three ETFs. Conversely, if you just broadly screen for small-cap ETFs you’ll get an overwhelming list of over 800 ETFs to choose from.
A smaller list is better, particularly when doing side-by-side comparisons. And remember the screener is a starting point that can ensure you’re looking at ETFs that meet your investment objectives. But it doesn’t replace, however, the need for you to perform your own due diligence on each ETF that you choose to buy.