Targeting ETFs

Three ways the Fidelity ETF screener can help you find investment opportunities that fit your strategy.

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With more than 1,600 different exchange-traded products (ETPs) to choose from, it can sometimes be daunting to uncover the right one for your investing objectives. The new Fidelity ETF/ETP screener (login required) can help you to do just that. Using the new features, you can:

  • Quickly find focused ETFs that match your investment goals
  • Access a list of sector or fixed-income ETFs with similar objectives, in two clicks or less
  • Screen for bond type, issuer, inflation-protected, floating rate, and high yield

Soon, you will also be able to screen by index, geography, commodity, and currency objectives. That’s in addition to more than 100 existing screening criteria, including asset class, industry, investing objective, and expense ratio.

If you have determined the appropriate mix of different asset classes to comprise your portfolio and are interested in exploring the ETF universe, here are three tips and online tools to help you get started:

1. Assessing the essentials: fundamentals and technicals

ETFs are baskets of securities that attempt to track or, in the case of actively managed ETFs, outperform an index. You can use ETFs in a variety of ways, including as a low-cost building block for your portfolio, as a way of helping diversify your portfolio, to tactically make short-term overweights or underweights to different asset classes and segments of the market, as a tool to manage strategic exposures, and as a tax loss harvesting tool.

However, before searching for ETF opportunities, it’s important to understand their basics and how ETFs can help you accomplish your investing goals. For instance, you should know the difference between active and passive ETFs, the costs associated with ETFs, and how to assess their liquidity, among other factors.

You should also understand the similarities and differences between ETFs and other vehicles (e.g., mutual funds) so that you can make the right selection for your strategy. With this knowledge, you can map out a plan for how ETFs may fit in your portfolio and narrow your search for the types of ETFs that might be best for your strategy.

2. Know your ETF search options.

With an understanding of how ETFs can fit into your portfolio, the ETF screener on may be a launching point to find investments that match your investing objectives. Here are a few screening criteria that you may find particularly useful:

  • ETF characteristics—Search for ETFs by asset class (stocks, bonds, etc.), sector, minimum asset levels, and expense ratio.
  • Objectives—Sort by geography (U.S., international, and country), by company size (large, medium, small), and style objective (value, growth, or a blend of the two).
  • Fundamentals—Evaluate the components of the ETF’s holdings by criteria such as cash flow, sales, book value, and price multiples.
  • Performance—Screen for top performing ETFs over a period of time (one, three or five years), and compare an ETF to its benchmark (tracking error).

To start a screen, simply visit the Fidelity ETF screener and select “Start a screen.” Here, you’ll find the criteria listed above and more—including tax considerations and analyst ratings .

One way to build a comprehensive screen is to outline the characteristics that are important to you, then tailor the screen as needed. For instance, suppose you are looking for stock ETFs with a “very high” amount of net assets ($594.26 million in the ETF screener), a “very low” net expense ratio (0%-0.31%), and the highest month-end three-year Sharpe ratio (a measure of how much return an investor receives in excess of a riskless rate for assuming the risk of a portfolio). A search such as this would yield individual ETFs that you could then research further.

A new feature in the ETF screener shows you predefined views on different themes you select (e.g., sector, fixed income, commission-free ETFs) or predefined screens you create on your own. What this means is that, when you run a screen, you will see the ETF’s basic facts, performance and risk, income characteristics, technicals (i.e., chart patterns), and third party analyst ratings. These predefined views show up automatically so that you don’t need to open multiple pages to find this information. It also makes it easier to compare key factors among different ETFs.

3. Consider third-party expert screens.

In addition to analyst ratings for individual ETFs, you might also consider screens set up by experts (login required) to help identify ETFs that might fit your strategy.

Fidelity offers a variety of third party expert screens, offered by leading ETF research firms. You can find these by selecting “expert screening strategies” on the left side of the ETF screener page (login required). Among these screens, you’ll find:

  • Deep value ETFs—Managed by Morningstar, this screen filters for ETFs that hold securities that are trading in deep value territory based on characteristics including price/book and price/sales ratios.
  • Sharpe stars—Managed by Sabrient Systems, this screen filters for long-only ETFs with superior Sharpe ratios (high expected return for a given level of volatility).
  • Large domestic equity ETFs—Managed by S&P Capital IQ, this screen filters by size, region, average trading volume, and expense ratio.

Putting ETFs into action

Of course, screening for ETF opportunities is just the first step. Once you’ve found some candidates that look appealing and align with your investing strategy, you can then dig deeper into the characteristics and underlying components of the ETF. Make sure the underlying investments are ones that you would like to own and fit your investment goals, risk tolerance, and time frame.

Learn more

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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.
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 your 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 pre-selected 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.

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