Definition and Example of an ETF Screener
Exchange traded funds (ETFs) are funds that contain a basket of securities or stocks that track the performance of an underlying index, sector, or group of assets. ETFs might track a group of bonds or commodities, or an index like the S&P 500.
Shareholders who purchase ETFs don't own the underlying assets but have indirect ownership through the funds. While similar to mutual funds, ETFs trade more like stocks but with lower fees and higher liquidity than shares of mutual funds. In other words, shares of ETFs can usually be bought and sold easily and with no delays in execution.
The ETF screener selects a handful of funds to analyze more closely after the investor has entered the criteria they seek.
ETF screeners—also called "ETF filters"—can help investors search for a particular type of ETF. An ETF screener allows investors to narrow down their investment choices to target specific criteria, including the type of companies, industry, and fees associated with the ETF.
For example, suppose an investor is looking for a large-cap stock ETF. The ETF screener can be used 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. Next, the screener can sort the funds by a data subset, such as expense ratio or the historic annualized rate of return.
How ETF Screeners Work
Most ETFs track a benchmark index or asset, similar to index mutual funds. The first step is to find ETFs that invest in your desired benchmark or category. It's important to check the ETF's tracking record, which measures how closely the fund tracks its benchmark. The closer, the better.
Next, you can narrow down the choices that match your desired criteria, which might include the following:
- Asset class, meaning bonds, equities, or commodities
- A large total number of assets under management (AUM)
- High trading volume
- How long the fund has been in existence—called "time since inception"
- Low expense ratio
- Sectors, such as financials or technology stocks
- Large corporations or small and mid-sized companies
- Market returns
It's wise to buy ETFs with a relatively high amount of assets under management, high trading volume, and long track records of performance. The high assets and trading volume matter, since you'll be able to buy and sell your shares without delays in execution, as compared to thinly traded ETFs.
Some screeners will let you search for total returns for a group of ETFs and filter out those that may be better for your personal tax situation. You can also add the ETF's management style into the equation—whether you want an ETF with an active or passive management team.
Higher assets and greater trading volume generally indicate a better ETF choice than one with lower assets and thin (lower) trading volume.
There are many types of criteria that can be used to filter ETFs. For instance, suppose you're looking for a low-cost ETF that tracks the S&P 500 index. You could 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 a few of the cheapest identified, you can analyze those individually to determine which funds best meet your needs. Many ETF screeners allow for a side-by-side comparison of the screened ETFs.
Although ETF screeners can remove some of the guesswork out of choosing ETFs based on the criteria selected, you still need to research which ETFs are right for your investment objectives, financial goals, and risk tolerance.
Types of ETF Screeners
There are many types of ETF screeners. The following list is in no particular order. Learn more about each screener's functions and ease of use:
Vanguard Mutual Fund and ETF Screener
Vanguard was a pioneer of indexing and has extended this expertise into the realm of ETFs. Vanguard's ETF screener allows investors to screen for ETFs alone, and they can also include mutual funds in the search. Investors can choose to screen Vanguard funds or include all other funds in the ETF or mutual fund universe. They also can choose one particular fund family. Other filter options include fund type, fund category, expense ratio, and historical returns.
Morningstar ETF Screener
Morningstar is another mutual fund pioneer. It has extended its knowledge and resources to the expanding world of ETFs. Morningstar lets you set up a free account by entering your name and email address. This initial registration also includes an option to receive free email newsletters about mutual funds and ETFs. Morningstar's Premium Services offer much more to investors, although they require fees.
ETF.com is completely devoted to ETFs. It helps investors track down the best ETFs for their respective investment objectives. This online ETF screener has an intuitive search function. Investors can choose up to three of the best ETFs based upon the selected search criteria, including geographic region, investment category, style (i.e., focus, niche, and segment), and analyst picks.
Seeking Alpha ETF Screener
This ETF screener is among the easiest to use. However, 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. It also has other filters, such as leveraged ETFs and inverse ETFs, which might not appeal to the everyday investor. To make this screener most useful for nonprofessionals and more experienced ETF investors, select to exclude the options of Leveraged, Inverse, and ETNs (exchange-traded notes); then, complete the search.
Another ETF screener that is geared toward more experienced ETF investors is ETFdb.com. It offers a relatively 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.
- ETF screeners are tools that allow investors to filter through all of the ETFs on the market to find the ones that meet specific criteria.
- The criteria that can be filtered with an ETF screener include expense ratios, market returns, company sizes, and sectors.
- It's important to determine which criteria match your investment objectives, financial goals, and risk tolerance.
- ETF screeners can be geared toward novice or professional investors.