Are you having trouble deciding which ETFs are best for your portfolio in 2023?  I can’t blame you.

After all, there are currently over 11,000 Exchange Traded Products in existence, with over 3,000 listed on U.S. exchanges.  Choosing the best ETFs is not very complicated, but there are a lot of bad ETFs that investors should avoid.

Common Mistakes When Investing In ETFs

Assets Under Management denotes the total value of the fund’s holdings within a particular ETF.  The goal of any fund issuer or manager is simply to maximize AUM, so they earn management fees on more money.

Assets Under Management

Issuers promote large AUM as validation, but other funds often provide the same exposure at lower costs. A clear example of well marketed, large AUM ETF is SPY, the largest ETF in the world, with AUM of $340 billion.

Comparing two or more similar ETFs based on past performance is not an intelligent indicator of future performance.  The main benefit of investing in passive index ETFs is the diversification gained across a broad asset class.

Looking at Past Performance

Similar ETFs within a category will often overlap in over 80% of the stocks they hold, so variations in past performances are based on small holding differences within a fund’s portfolio. 

However, these minor differences in holding weights often do not stay consistent within a given ETF because index methodology changes annually.

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