When (NOT) to Buy ETFs

With new ETFs being offered to the public as quickly as sponsors can get regulatory approval, it’s no surprise to see investors jumping at any new offering that comes their way.

Is that really a good idea?

I don’t think so. While there is a need to have as many ETF choices as possible, it doesn’t mean you should buy the latest one just because it is available. If you are following trends, you still need to make sure that the latest ETF is moving in the right direction to help you achieve your investment goals.

Here’s how I look at it in my advisor practice: I will not invest in any ETF which does not have at least a 9 months track record of price data.

Why?

I need that much information to determine where the long-term trend of this ETF is headed. Looking at only a 30-day period, for example, is simply not going to give me any idea about where this ETF has been and where it is at in the bigger scheme of things.

That’s why my Fund Tracker StatSheet contains only 160 ETFs, although there are over 300 being offered today. As they gain price history, I will add them to my data base, if they fall in the categories I am tracking.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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