How to choose the right ETF for long term investing?

Hi, welcome to this new video. The topic today is how to choose the right ETFs for your long term investing portfolio. If you don't know, an ETF is an exchange traded fund and the idea is that it will give you the opportunity to invest in an asset class that can be bonds, it can be equity market, it can be commodities at a very reasonable price. Now, in the past, if you consider the option that you had to do that, what was very popular was the idea of using mutual funds. So mutual funds is something where you have a fund manager that is trying to beat some kind of index. What is the problem? The problem is that you have to pay this fund manager a lot of money in terms of fees. And if you look at the statistics, more than 90% of the time. I think the right number is 96. If I'm not wrong, the mutual fund cannot beat the index they are tracking. So what is the message? Instead of paying someone a lot of money for trying to do better than the market where the chances to do that are very low, why not investing in the market itself at a very reasonable price? And to do that you can use ETFs. Now the problem is that ETFs are becoming so popular that there are really a lot of them. So it's not easy to choose the right one. But to help you in this task, there is this website that I want to share with you is etfdb.com is free. And the nice thing is that they have this screener here that will help you to choose the right etf. So I want to show you a few examples so you will see how to do that. So in a long term portfolio you should have diversification of different asset class. So you probably know that it's good to have some equity, maybe something tracking US emerging market. Then it's good to have some bonds and also some commodities like gold. So let's say for example you are looking for an ETF truck in gold. Now what do you do? You click here on commodity and then you will go to the to this point here where you have gold. Okay? And you will see that there are 17 ETFs. Now what do we do? You see here first thing that is very important, there are two types of gold ETF tracking gold. The first type is futures based and the second one is physically backed. So the first one is basically tracking the gold, not directly, but using some kind of derivatives, the futures. In my opinion in a long term investing portfolio is better to have the physically one because you don't really know what is going to happen in case there is a lot of volatility, some kind of recession. You don't know how the futures base will behave. In theory, they will track the gold in this case. But when there are events that are not normal, the derivatives can have weird behavior. So in this case I think it's better to choose the physically backed. And you see that now we have reduced our choice to six. Now let's see what we should look for when we choose the the right one. Now the first thing that I want to highlight is here in this table is this the volume. Now of course we want something with enough volume because if the volume is too low, we may have some issues if we want to enter or exit at some price. And here you see a clear cutoff. There are these two guys trading at average volume of 7, 13 million. And then all the others are way lower. So I will say that these four can be removed from our selection. Then what is the asset under management? Also these two have quite big numbers, so it's okay. Now which one of these two shall we take? In my opinion, the first thing you have to do after you have identified a good volume is to check here at the expenses. Why expenses is how much we are paying for the ETF is not the 2, 3, 4, 5% that we have to pay to the mutual fund manager. But anyway, even if the prices are way cheaper, it's better to choose something that is more convenient. So you can see here that the gold tracked by the GLD have this expense ratio 0:4. But this one, the IAU is only 0.25. So it seems that we should prefer this guy to this. Now to double check what we can do, we can click here and then we will have a lot of information. And this is great because this website will give you a lot of information for free. Now the volume average volume 3 months is 7.5 million. And here is 13. So both are quite good. This is the one that we are looking at the 0.25% so we have more volume. Okay, Asset under management this is 30, this is 12 million. So both of them are good. Then we can go down and we will see the expense ratio here. The 0.25 compared to the 0.40. And we can also have a look here. You see there are a lot of information. They give you the chart and then they give you volatility. So you can check the details. But again it seems that this is a better choice. So in this case, using this website you would say, okay, if I want to invest in gold, maybe I can look at this ETF called iau. Now let's take another example. Suppose you are interested in bonds, okay? So you want a bond and which kind of bond? Let's say we are looking at the US bond and maybe this medium term. Okay. So again let's go to overview and we can see something first. You see here there are some bonds that are three times or ultra. This means they are leveraged. So they are designed in a way to theoretically give you two or three times the return of the, of the bond. But we don't want them for the long term. Leverage stuff is not, is not really a good choice. So let's look at the first one. Here we have IEF, this is seven to 10 years. Okay, this is three to seven. What else? We have the volume here. And again you see a really, really clear cutoff here, right? You have this guy 4,500,K. And then here we go way below 100K. So I will say that we don't want to consider them. Okay? And here what we have, we have the asset under management is also quite good. More than 3 million for all of them. So let's consider these four as possible choices for the medium term portfolio, Medium term bond. Now let's look at the expenses again. Okay, in terms of expenses, you see here we have 0.15%, 0.15 and here we have 0.6 in 0.7. So clearly the candidates that we should look for are these two. Right? Because the expense ratio here is double or more. So let's compare these two, the SCR and vgit. Okay. And to do that again, what do we do? We open the, The corresponding link and we see. So this is the.006, the 007. The volume, okay, is 500K. What else we can go down here they will tell you for example the type of composition of the portfolio. For example, here they tell you the duration of the bonds and the rating of the bonds. So you have a lot of information. But what we want to see is for example, okay, the dividend, okay, Here you can compare this number with this number here. So it seems that this guy is giving us 216%, this 223. And remember that this Schr is the one with lower expense ratio. So it may be a consequence of this low expense ratio that we have slightly more dividends here. Yeah, the other things are similar, right? The beta that is basically telling you the correlation with the market is similar here. We have a little more. Yeah, the volatility is even higher for this guy. Okay. And the chart, if you have a look, you will see that is basically very, very similar. Right? So what is the, the point here again? By looking at these numbers, we realize that probably the best option is this, right? Because we have lower expenses. So even if ETF are way cheaper than mutual funds, we can still look for the cheapest one, provided we have enough volume and is basically compatible with our portfolio. Now, as last example, let's go to the equities and maybe we can have a look at. Let's see, why is zero. We still. Okay, let's click on equity. Okay. And let's look for, for you see, you have so many options, but we can check for emerging markets here. So we click here and then here you see the emerging market. So again, as before, what do we do? First we see if there is a cutoff for the volume. And I would say that definitely here. There is a big difference here, like from 1 million we go to less than 300k. So it's good we can remove these guys. And then we, we are here with five. Here the volume is way bigger. Actually it's 14 times. Here is 67 million. But let's have a look at expenses because that's also important. So remember, we are looking at the first five. So we go here expenses and okay, expenses. Definitely this one. No, you see, 0, 6, 7 is way above the others. Then what do we have here? They are quite close. I would say 11, 13, 14 and 12. Okay, so in this case, since they are so close, maybe it's better to look for the, for the one with larger volume. So remember the number 1, 2, 4 and 5 are similar in terms of expenses. And here we have. So the possible are 1, 2, 4 and 5. And you can see here that definitely these two have higher volume than this 10 times. So we can remove this. This one seems to have better return as well, is the largest one in terms of asset under management. So I would say that probably this is the right choice. We can check again, but it seems that VWO is a good one. So let's see 0.12 again. Okay, Let's go down here. You can have a look at how the allocation is done. And of course ETF may have different type of allocation. Like for example, you see that this one, The VWO is 67% in Asia, whereas this one is 69. So you also have to go and check if you are fine with this kind of allocation. But they are quite close. So here we can go down and see do we have dividends? Okay, VWO is giving us 254. This guy is giving us 249. So this VWO, we also have more dividends. So I will say in this case, again, the winner seems to be the vw. So basically that's the idea of how to use this website to choose your ETFs, you need to have an idea about the allocation the categories that will be in your portfolio. So for example, again, you may have commodities, you may have equities, you may have bonds. And then for each category you have to check here what is the best ETF in terms of volume, in terms of expenses? Because again, remember, you don't know the profit or loss of the market. You don't know if a stock or ETF will go up or down. But definitely if the expense, if the expense ratio is higher, you will pay more fees regardless of what happens. So this is something you can control and you should minimize. So with this video I would like to really address this topic that is quite important. I believe that mutual funds are very expensive for no reason. And I think that if you create your own portfolio using ETFs or maybe you ask advice for some financial advisor to help you, ETFs can provide a way better alternative to expensive mutual funds that fail very, very often to give you the return you are paying for. So thank you for watching and if you have any question, please write me a comment and I will be happy to answer. And as usual, see you next time.