Tqqq expense ratio how to#

IShares S&P MidCap 400 Growth Index Fund (IJK) gets 2-star or a Dangerous rating because it has more dangerous-rated holdings. And there is a meaningful difference in the quality of holdings. Their portfolios are not close to being the same. There is no overlap in the top 5 holdings among these three ETFs. How is that possible if they are supposed to hold the same stocks? The answer is that they do not hold the same stocks. Naturally, many investors might assume that having “index” in the ETF’s name means all the holdings are the same or the provider cannot influence the nature of the holdings, but that is not true.įor example, of the three “index” ETFs in the mid-cap growth style, two get a Neutral rating while one gets a Dangerous rating. The worst-rated ETFs in the All Cap Blend, Large Cap Growth, All Cap Growth, and Mid Cap Growth categories all belong to First Trust: First Trust Value Line 100 ETF (FVL), First Trust Large Cap Growth AlphaDEX Fund (FTC), First Trust Multi Cap Growth AlphaDEX Fund (FAD), and First Trust Mid Cap Growth AlphaDEX Fund (FNY).

My firm covers over 3000 stocks and is known for the due diligence done on each stock we cover.įirst Trust’s ETFs appear more often than any other provider in Figure 2, which means they offer the most ETFs with the worst holdings. My overall ratings on ETFs are based primarily on my stock ratings of their holdings. The ETFs are listed in descending order by style per my style ratings, detailed in my 2Q Style Rankings report. Figure 2 shows the ETFs within each style with the worst holdings or portfolio management ratings. This step is by far the hardest, but it is also the most important because an ETF’s performance is determined more by its holdings than its costs.

Tqqq expense ratio how to#

How To Avoid ETFs with the Worst Holdings The quality of holdings matters more than price in making an ETF attractive for investors. These observations underscore why investors should not choose ETFs based only on price. Interestingly, ProShares UltraPro Dow30 (UDOW), ProShares Ultra QQQ (QLD), and ProShares UltraPro QQQ (TQQQ) are the next three highest rated ETFs in Figure 1, ranking in the low 20’s among all the style ETFs I cover overall despite being among the five most expensive ETFs. Dividend Equity ETF (SCHD) is my top-rated style ETF overall in while also being the fifth least expensive. In addition to being one of the five least expensive, Vanguard Total Stock Market ETF (VTI) ranks well among style ETFs in general and has over $31 billion in assets, the most of any fund in Figure 1. Broad Market ETF (SCHB) are the two least expensive. Sources: New Constructs, LLC and company filingsĪdvisorShares Madrona Forward Domestic ETF (FWDD) and AdvisorShares TrimTabs Float Shrink ETF (TTFS) are the two most expensive US equity style ETFs I cover. ProShares provides three of the five most expensive style ETFs, as well as four of the five of the most expensive sector ETFs covered earlier. More on general sector ETF costs is here. The lower weighted-average TAC is a good sign that investors are putting money in the cheaper ETFs.įigure 1 shows the most and least expensive style ETFs in the US equity universe based on total annual costs.

Weighting the TAC by assets under management, the average expense ratio is lower at 0.19%. To ensure you are paying at or below average fees, invest only in ETFs with an expense ratio below 0.44%, which is the average total annual cost (TAC) of the 221 US equity style ETFs I cover. The first step here is to measure what is cheap and expensive. In addition, low asset levels tend to mean lower volume in the ETF and large bid-ask spreads.ĮTFs should be cheap, but not all of them are. Low levels of liquidity can lead to a discrepancy between the price of the ETF and the underlying value of the securities it holds. This is the easiest issue to avoid and my advice is simple: Avoid all ETFs with less than $100 million in assets. How To Avoid ETFs with Inadequate Liquidity Advice on How to Find the Best Style ETFs is here. I address these red flags in order of difficulty to overcome. Below are three red flags investors can use to avoid the worst ETFs: The number of ETFs has little to do with serving investors’ best interests. Why are there so many ETFs? The answer is: because ETF providers are making lots of money selling them. There are as many as 40 in any given style and at least 221 ETFs across all styles. Picking from the multitude of style ETFs is a daunting task.