What Is an ETF Screener, and Which One Should I Use?
ETFs, or exchange-traded funds, track the performance of an asset such as bonds, a commodity, a group of assets or an index like the S&P 500. Shareholders that purchase ETF securities don't own the underlying assets, but do have indirect ownership through the ETF.
ETFs, while similar to mutual funds in some ways, trade more like stocks with lower fees and higher liquidity than shares of a mutual fund. This makes ETFs an attractive option for many individual investors.
Finding the best ETFs to invest in starts with choosing the best screener. Before you begin using your chosen ETF screener, learn how screeners work and what traits to look for in the best ETFs.
ETF Screener Definition
An ETF screener, also called an ETF filter, typically consists of an internet-based or software program that helps users find ETFs after setting certain criteria to narrow down or filter the search from every ETF available on the market. The screener returns a handful of funds to analyze more closely.
When using an ETF screener, the investor usually searches for a particular type of ETF, such as a large-cap stock ETF. The investor can then use the ETF screener to display all of the publicly traded ETFs categorized as large-cap stock, or a sub-category like large-cap growth or large-cap value, and then have the screener sort the funds by a data subset, such as their expense ratio or historic annualized rate of return.
Understanding the Filtering Options
The vast majority of ETFs track a benchmark index or asset, similar to how index mutual funds work, but the best ETFs generally have the lowest expense ratios.
For example, if you're looking for the best ETF that tracks the S&P 500 index, you would narrow the universe of ETFs down to the cheapest ones that hold large-cap stocks. Some screeners may require further classification such as "large-blend" or "U.S. Equity."
Once you have three or four of the cheapest, such as S&P 500 index ETFs, you can analyze those three individually to see which best suits your needs.
Other data points to consider when screening and analyzing ETFs include assets under management, trading volume and date of inception. It's wise to buy ETFs with relatively high assets, good trading volume and long track records of performance. The high assets and trading volume matter because investors should avoid buying thinly traded ETFs.
Thinly-traded ETFs have the potential for greater swings in price or the bid-ask spread. ETFs can trade at a premium or discount, and the higher the assets and trading volume, the tighter the spread.
For clarity, higher assets and greater trading volume generally indicate a better ETF choice than one with lower assets and lower trading volume.
After finding ETFs that invest in the benchmark or category of your choosing, and narrowing down the choices to ones with higher relative assets, volume and time since inception, take a look at one more data point called the tracking record. This means to look at how closely the fund tracks its benchmark — the closer it is, the better.
Once you've determined the key criteria to choosing your ETF, there are other factors you may want to take into account. There are some screeners that allow you to search for total returns for a group of ETFs and which of these investments may be better suited to your personal tax situation. You can also add the ETF's management into the equation — whether you want an ETF with an active or passive management team.
Choosing an ETF Screener
To avoid any bias toward a particular ETF screener, the following list has no particular order. Each description summarizes the respective screener's functions and ease of use.
- Vanguard Mutual Fund and ETF Screener: Vanguard was one of the pioneers of indexing and it has extended this expertise into the realm of ETFs. Vanguard's ETF screener allows investors to screen for ETFs alone or they can also include mutual funds in the search. Investors can choose to screen Vanguard funds or they can include all other funds in the ETF and/or mutual fund universe. Investors may also choose one particular fund family. Other filter options include fund type, fund category, expense ratio and historic returns.
- Morningstar ETF Screener: Morningstar is also a pioneer in the mutual fund industry that subsequently extended its knowledge and resources to the expanding world of ETFs. Morningstar's ETF screener can be accessed by starting on its home page, then by clicking on the ETFs link, then the link to ETF Screener. From there you may set up a free account by entering your name and email address. This initial registration also includes an option to receive free email newsletters on mutual funds and ETFs. Morningstar's Premium Services offer much more to investors, although these added services require fees.
- ETF.com: ETF Screener and Database: This website, called etf.com and completely devoted to ETFs, does a fine job of helping investors track down the best ETFs for their respective investment objectives. This online ETF screener has an intuitive search function. It lets investors choose up to three of the best ETFs based upon the selected search criterion, which includes geographic region, investment category, style (i.e. focus, niche, and segment), and among analyst picks, as well as other selections. This particular ETF screener, although intuitive and relatively simple, may be best suited for investors with more experience.
- Seeking Alpha ETF Screener: This ETF screener is among the easiest to use, although some of the filters are geared toward experienced investors. For example, the Seeking Alpha ETF Screener includes the primary search criteria, such as asset class, expense ratio and trading volume, but it also has other filters such as leveraged ETFs and inverse ETFs that won't appeal to the everyday investor. To make this screener most useful for nonprofessionals and more experienced ETF investors, simply select to exclude the options of Leveraged, Inverse, and ETNs (exchange-traded notes), then complete the search.
- ETFdb.com ETF Screener: Another ETF screener geared toward more experienced ETF investors, ETFdb.com offers a relatively simple and easy-to-navigate filter tool. After selecting an asset class, such as alternatives, bonds, equity and commodity, the screener opens sub-categories such as the various market caps and regions, as well as sectors and investment styles.
The Bottom Line
Investors of every experience level can try each ETF screener—those described above and others—to see firsthand which one works best for their unique skill level and understanding. In general, the simpler the better.
Keep in mind, screeners take some of the guesswork out of choosing ETFs for you based on what criteria you select. But you still need to do your research on which ETF is right for you based on your own personal financial situation and goals. In effect, you need to know exactly what you're looking for before you use a screener.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.