How To Find The Best Style ETFs

Finding the best ETFs is an increasingly difficult task in a world with so many from which to choose.

You Cannot Trust ETF Labels

There are at least 47 different All Cap Blend ETFs and at least 256 ETFs across all styles. Do investors need that many choices? How different can the ETFs be?

Those 47 All Cap Blend ETFs are very different. With anywhere from 11 to 3661 holdings, many of these All Cap Blend ETFs have drastically different portfolios, creating drastically different investment implications.

The same is true for the ETFs in any other style as each offers a very different mix of good and bad stocks. Some styles have lots of good stocks and offer quality funds. The opposite is true for some styles, while others lie in between these extremes with a fair mix of good and bad stocks. For example, the All Cap Blend style, per my 3Q Style Rankings Report ranks third out of 12 styles when it comes to providing investors with quality ETFs. Large Cap Blend ranks first. Small Cap Value ranks last. Details on the Best & Worst ETFs in each style are here.

The bottom line is: ETF labels do not tell you the kind of stocks you are getting in any given ETF.

Paralysis By Analysis

I firmly believe ETFs for a given style should not all be that different. I think the large number of All Cap Blend (or any other) style of ETFs hurts investors more than it helps because too many options can be paralyzing. It is simply not possible for the majority of investors to properly assess the quality of so many ETFs. Analyzing ETFs, done with the proper diligence, is far more difficult than analyzing stocks because it means analyzing all the stocks within each ETF. As stated above, that can be as many as 3661 stocks, and sometimes even more, for one ETF.

Any investor worth his salt recognizes that analyzing the holdings of an ETF is critical to finding the best ETF.

Figure 1: Best Style ETFs

HTFB_Style_ETF_3Q14

The Danger WithinSources:   New Constructs, LLC and company filings

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Disclosure: NewConstructs staff receive no compensation to write about any specific stock, sector, or theme.

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