As exchange traded funds become more popular with investors, the question becomes how to rate them? Eleanor Laise of the Wall Street Journal, looks at the different ratings available. (Morningstar, Lipper and S&P all rate ETFs at this time.) Rate them like a stock or rate them like a mutual fund? The two rating systems are different enough that they can generate conflicting results. The mutual fund method looks at past performance and higher returns with less risk. The stock method looks at valuation and earnings growth of stocks within the funds
The rating providers use different criteria as well and they are not necessarily comparing the same things when giving an ETF a rating. The 200-day moving average continues to be a good way to look at the trend of an ETF and can be used as a good indicator when to get into or out of an ETF investment.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.