How to choose an ETF

The factors to be considered are many and to some extent even subjective. Some of the most relevant would probably be:

• Replication

It is always better to prefer a physically replicated ETF to a synthetic one.

• Currency

To hedge against foreign exchange risk, you need to choose ETFs that are sufficiently diversified and / or with currency hedging.

• Distribution policy

If you intend to do a PAC, it is better to prefer accumulating ETFs. Distributing ETFs are only suitable to investors that have a very large capital right away, in order to have consistent periodic dividends.

• Fund volume

The bigger, the better. A large fund ensures that ETFs are exchanged easily, in big numbers, and that the spread is not too high. A minimum of 100 million is advisable.

• Commissions

The annual TER must be as small as possible, less than 1%. Same for the buy and sell commissions, which depend on the broker used.

• Launch date

Indicates how long the ETF has been listed on the stock exchange. It is preferable to invest in ETFs that are not too young. An older ETF is both more reliable, and less likely to be delisted.

• Price

Simply how much a single share of an ETF costs, a parameter that vary accordingly to your strategy and your capital.