How To Compare ETFs: Your Questions Answered!

April 13, 2020

Unfortunately, live webinars never last long enough. I got plenty of great questions during last Thursday's webinar, "Pick This, Not That: How To Compare ETFs," but I couldn't get to them all. That's why I'm answering them here and now. (Questions have been lightly edited for space and clarity.)

If you missed last Thursday's webinar, you can now register and watch the on-demand replay at any time.

So, let’s get to it.


Could you explain what the Max LT/ST Capital Gains Rate means?

This metric, found in the ETF Comparison Tool and in our fund reports, refers to the maximum long-term and short-term tax rates for U.S. investors on a realized capital gain. This can differ from ETF to ETF, depending on the fund's structure.

For most U.S. equity ETFs (and for the moment, most ETFs in the Comparison Tool), you'll see this metric stated as 20%/39.60% (meaning, long-term gains are taxed at 20%, while short-term gains are taxed at 39.60%). But futures-holding commodity pools, for example, instead have a max long-term/short-term capital gains tax rate of 27.84%/27.84%.

Where does dividend yield factor into the selection criteria?

In the webinar, I went over three potential use cases for ETFs: asset allocation, speculation and tax-loss harvesting, discussing how the selection criteria for ETFs for each use case varied due to your goals.

The selection criteria I offered up were broad starter points, though. You absolutely should consider other metrics relevant to your particular circumstances as well, such as dividend yield—especially if you're an investor seeking sources of regular income.

In fact, if dividend yield specifically matters to you, we have a category of high dividend-paying ETFs that we track. I invite you to check them out (and maybe run a few pairs through the ETF Comparison Tool, too).

Is there a difference in the underlying APs per ETF, such that some will stand up more readily to creations/redemptions, levels of capitalization and arbitrage opportunities?

The short answer is yes—but to end investors, most of what you describe can be thought of as behind-the-scenes machinery. The number of APs supporting an ETF does matter, but it's not easily discoverable, so it's not really a data point upon which most investors can feasibly base their ETF comparisons. (The way depth of AP bench shows up for investors is in bid/ask spreads and premiums/discounts to NAV.)

However, if you want to know more specifics about a fund's block liquidity, you should check out our individual ETF fund reports for more information. Under the Tradability tab, on the right-hand column, there's a wealth of information about how easy it is to create/redeem in the fund.

One particular metric you might be interested in is called "Creation Unit/Day," which is the 45-day median share volume divided by the creation unit size—basically, the higher this number, the easier the fund is to trade in bulk or in odd lots.



How can I find a list of similar ETFs to a targeted ETF (example: SPY)?

You've got a few choices.

For starters, at the top of every fund report, there's a list of Competing ETFs. For example, here's the one at the top of the SPDR S&P 500 ETF Trust (SPY):





We also have sector and industry Channel pages, so you can find additional ETFs in a given category. For example, if you're looking for ETFs like SPY, then you might check out our S&P 500 ETF channel or our large cap channel.

You can also find the same data, along with additional comparative information on flows, performance and more, on our ETF Screener.

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