ETF ideas for this market

Fidelity’s ETF screens can help generate potential investing ideas.

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A good investment strategy involves periodically assessing your holdings to see whether your investment mix aligns with your objectives. With the Brexit vote in the rear view mirror and a Fed rate hike appearing to be on hold for the time being, some investors may be looking to reevaluate existing holdings and explore new opportunities.

If you own ETFs, or are interested in generating new ideas, one tool that may be of use is a screener that can quickly sort through candidates based on choices you make to help you choose the specific investments that you'd like to incorporate into your investment mix. On Fidelity.com, you can search for ETFs using a variety of characteristics, like the fund’s objectives, fundamentals, technicals, performance, volatility, trading characteristics, tax considerations, and analyst ratings.

You can also choose to get started using predefined screening strategies from independent experts. On Fidelity.com, you can find 13 different expert screens (login required), including those that seek widely held ETFs, as well as some featured screens that search for different strategies—like those that may offer relatively attractive risk-return characteristics.

Below, we feature five popular expert screens that you can find on Fidelity.com, plus top results for each.1

1. Large U.S.-based ETFs

S&P Capital IQ offers the Large Domestic Equity ETFs screen that identifies ETFs that are relatively low cost and highly liquid. This screen filters for ETFs with net assets of $2 billion or more, a 30-day average volume of two million or more, and a net expense ratio of 0.5% or less.

As of July 26, 2016, the top ten results were:

  • iShares Core S&P 500 ETF (IVV)—Available for purchase commission free on Fidelity.com.
  • SPDR S&P 500 ETF (SPY)
  • Vanguard Total Stock Market ETF (VTI)
  • Vanguard S&P 500 ETF (VOO)
  • Financial Select Sector SPDR Fund (XLF)
  • Energy Select Sector SPDR Fund (XLE)
  • Technology Select Sector SPDR Fund (XLK)
  • Health Care Select Sector SPDR Fund (XLV)
  • Consumer Staples Select Sector SPDR Fund (XLP)
  • Utilities Select Sector SPDR Fund (XLU)
2. Large international ETFs

Another S&P Capital IQ screen is Large International or Global Equity ETFs which identifies large, international stock ETFs that are relatively low cost and highly liquid. This screen excludes U.S.-based equities, and filters for net assets of $2 billion or more, a 30-day average volume of two million or more, and a net expense ratio of 0.75% or less.

As of July 26, 2016, the top ten results were:

  • iShares Core MSCI EAFE ETF (IEFA)—Available for purchase commission free on Fidelity.com.
  • iShares Core MSCI Emerging Markets ETF (IEMG)—Available for purchase commission free on Fidelity.com.
  • Vanguard FTSE Developed Markets ETF (VEA)
  • Vanguard FTSE Emerging Markets ETF (VWO)
  • Vanguard FTSE Europe ETF (VGK)
  • PowerShares QQQ (QQQ)
  • Schwab International Equity ETF (SCHF)
  • Vanguard FTSE All-World Ex-US ETF (VEU)
  • iShares MSCI EAFE ETF (EFA)
  • Deutsche X-Trackers MSCI EAFE Hedged Equity ETF (DBEF)
3. Risk-adjusted returns

One of the featured expert screens on Fidelity.com is Sabrient Systems’ Island Gainers, a screen that tries to find ETFs that are relatively isolated from the market but may provide steady gains. Specifically, it looks for ETFs with a lower beta (a measure of volatility in relation to the stock market as a whole), a higher alpha (a measure of excess returns over a comparable benchmark), and a higher Sharpe ratio (a measure of the return in excess of the risk-free rate per volatility). Its key criteria are a three-year beta from –0.5 to 0.95, an alpha greater than or equal to 1, and a three-year Sharpe ratio in the top 40% among all ETFs.

As of July 26, 2016, the full results of this screen were:

  • iShares U.S. Medical Devices ETF (IHI)
  • PowerShares S&P SmallCap Utilities Portfolio (PSCU)
  • PowerShares DWA Utilities Momentum Portfolio (PUI)
  • PowerShares S&P SmallCap Health Care Portfolio (PSCH)
  • Utilities Select Sector SPDR Fund (XLU)
  • Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS)
  • SPDR S&P Health Care Equipment ETF (XHE)
  • PowerShares S&P SmallCap Consumer Staples Portfolio (PSCC)
  • iShares MSCI Denmark Capped ETF (EDEN)
  • EGShares India Consumer ETF (INCO)
4. Sharpe stars

Another screen from Sabrient Systems seeks to find ETFs with the best excess return over the risk-free rate per unit of risk. This screen filters for stock and multi–asset class ETFs with a high three-year Sharpe ratio (top 20%) and a beta from 0.85 to 1.15.

As of July 26, 2016, the top ten results were:

  • iShares EDGE MSCI USA Momentum Factor ETF (MTUM)
  • PowerShares S&P 500 High Quality Portfolio (SPHQ)
  • Direxion All Cap Insider Sentiment Shares (KNOW)
  • PowerShares Aerospace & Defense Portfolio (PPA)
  • Barclays ETN+ Shiller CAPE ETN (CAPE)
  • SPDR Russell 1000 Low Volatility ETF (LGLV)
  • WisdomTree MidCap Dividend Fund (DON)
  • iShares Russell Top 200 Growth ETF (IWY)
  • iShares U.S. Aerospace & Defense ETF (ITA)
  • PowerShares Dynamic Large Cap Growth Portfolio (PWB)
5. Momentum and price

The Ned Davis Research Group’s Back on Track screen is another featured screen on Fidelity.com for investors who have a bullish longer-term outlook on the market and are also “price conscious.” It looks for ETFs that are in a longer-term uptrend but have recently experienced a short-term decline. This screen filters for large ETFs (net assets of $500 million or more) that were above their 200 day simple moving average but are in the red over the past four weeks, and where volume is rising (10-day average volume divided by 90-day is 1.2 or greater).

As of July 26, 2016, the full results of this screen were:

  • iShares 7-10 Year Treasury Bond ETF (IEF)—Available for purchase commission free on Fidelity.com.
  • Guggenheim Enhanced Short Duration Bond ETF (GSY)
  • Schwab Intermediate-Term U.S. Treasury ETF (SCHR)

Due diligence

If you think one or more of the ETFs identified by a preset screen—or one that you craft on your own—is interesting and may align with your specific investment objectives and risk constraints, your next step should be to research further. For example, a few key factors to consider (which you can find on Fidelity.com on an ETF’s snapshot page) for any ETF are the fund’s:

  • Expense ratio: Look for low expense ratios to reduce your overall costs.
  • Bid-ask spread: Look for small bid-ask spreads to reduce costs of investing.
  • Tracking error: Look for a low tracking error to find ETFs that indicate a better job of replicating their benchmark indexes.

Additionally, knowing what the individual components of an ETF are can give you a better sense of the exposure that an ETF provides. You can find an ETF’s components on its ETF snapshot page on Fidelity.com, under “Portfolio Composition.” On this page, you can also find the ETF’s style (value, growth, blend) and size (large, mid, small), as well as analyst ratings and key statistics.

Finally, any investing ideas should be part of a well-diversified investment strategy that conforms to your specific time horizon, objectives, and risk parameters.

Learn more

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Before investing, consider the funds' objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
Free commission offer applies to online purchases of Fidelity ETFs and select iShares ETFs in a Fidelity brokerage account. Fidelity accounts may require minimum balances. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). iShares ETFs and Fidelity ETFs are subject to a short-term trading fee by Fidelity if held less than 30 days.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
1 None of these screens include leveraged or inverse ETFs.
For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive, long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain Fidelity Brokerage Services LLC (FBS) platforms and investment programs. Additional information about the sources, amounts, and terms of compensation is described in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered service marks of BlackRock, Inc., and its affiliates.
Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector, are generally subject to greater market volatility as well as to the specific risks associated with that sector, region, or other focus. ETPs that use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETP may trade at a premium or discount to its net asset value (NAV), or indicative value in the case of exchange-traded notes. Each ETP has a unique risk profile that is detailed in its prospectus, offering circular, or similar material, and which should be considered carefully when making investment decisions.
As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing any investment by making it available to its customers.
The Fidelity ETF/ETP Screener is a research tool provided to help self-directed investors evaluate these types of securities. The criteria and inputs entered are at the sole discretion of the user, and all screens or strategies with preselected criteria (including expert ones) are solely for the convenience of the user. Expert screens are provided by independent companies not affiliated with Fidelity. Information supplied or obtained from these screeners is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell securities, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy or approach to screening or evaluating stocks, preferred securities, exchange-traded products, or closed-end funds. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation, and other individual factors, and reevaluate them on a periodic basis.
Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.

Past performance is no guarantee of future results.

These comments should not be viewed as a recommendation for or against any particular security or trading strategy. Views and opinions are subject to change at any time based on market or other conditions.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.

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