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Choosing the right ETF is top investor concern


Choosing the right exchange traded fund is the number one concern for experienced investors when investing in ETFs, according to E*TRADE Financial’s StreetWise quarterly tracking study.

With roughly 2,000 ETFs to choose from, and more coming to market at a rapid pace, investors may be beginning to feel overwhelmed, E*TRADE says.
The complexity of ETFs is also a big concern. Investors can be challenged with understanding the increasingly complex strategies providers are bringing to the market as they seek to deliver on both wide and narrow objectives alike. Given this complexity, investors are concerned that the fund’s actual performance may not align with expectations.
The third worry for investors is the tracking difference between the ETF and its underlying assets. Many ETFs aim to mirror the returns of a specific index. Yet in some cases ETF returns can lag the index’s, which can come as an unwanted surprise.
“ETFs have experienced extraordinary growth in recent years, allowing investors easy access to virtually any asset class and investing strategy,” says Rich Messina, SVP of investment products at E*TRADE Financial.
“With more choices than ever before, it’s no surprise that investors can experience selection fatigue. Before investing in any ETF, investors are wise to research the underlying positions of the ETF, the bid-ask spread, and the market capitalisation, which can go a long way in helping to reduce concerns. There are many tools available to help investors. For example, at E*TRADE we offer a comprehensive screener that can sort by rating, category, characteristics, and commission-free status so investors can choose the funds that may be right for their objectives and risk tolerance.”

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