Tips for Analyzing ETFs
When analyzing ETFs, you need to consider two things: First you must research the underlying indexes and classification benchmarks so you know what types of stocks are likely to be part of the ETF. Then you need to research the fund’s trading history to know how it performed in the various types of markets.
For example, if you believe that a full recession is underway, then you may want to consider weighting your portfolio more heavily with cyclical and technology stocks. Look at the charts for the ETFs you’re considering and see how well they did during the last full recession. Fortunately, because ETFs trade just like stocks on the major exchanges, you can analyze their price charts in almost identical ways. The technical concepts that apply when looking at the chart of a stock are also applicable to the chart of an ETF.
Just like you would for a mutual fund, you want to look at the ETF’s historic performance. Although history is no guarantee the ETF will perform in the same way in the future, it still gives you some reason to base your decision on the ETFs you want to use.
An excellent website for researching what the analysts are saying not only about individual ETFs but about sector choices as well is NASDAQ. There you find a treasure trove of ETF stories about where the market has been and where it’s going, along with ETF options to follow the trends. You may want to subscribe to both the latest ETF news and ETF commentary feeds available on this website. The subscriptions are free.
Another fantastic resource is ETF.com. This site provides an extensive collection of helpful research tools to make sure that your ETF research is as complete and thorough as possible. The site also provides a number of free newsletter services to which you may want to subscribe.
Lastly, Morningstar is a good source for ETF research. There you can find a lot of information about individual ETFs as well as ETF trends.
After you’ve done your research, you can pick entry and exit points by using the comparative performance charting tool, PerfCharts, at StockCharts.com. PerfCharts allow you to dynamically compare the performance of up to ten different stocks or funds on the same chart. Create your own with a unique group of symbols, or use the predefined PerfCharts to analyze popular groups, such as the major market indexes or U.S. commodity groups. To get started, click the tab for Free Charts at the top of any StockCharts.com web page, and then look for the PerfCharts box.
The S&P sector ETFs PerfChart is an excellent tool for visualizing relative strength. It allows you to quickly determine which sectors are moving up and which are moving down, helping you make sure you’re focused only on the top‐performing sectors.