Exchange traded funds (ETFs) are not yet second nature for publications, such as The Wall Street Journal. The paper’s traditional way of rating individual stocks isn’t going to work when it comes to rating ETFs according to Will McClatchy for ETFZone. He explains that for this reason, the WSJ’s  "ETF Gainers, Decliners, & Most Actives" web page, while accurate, may not be all that useful.

Their lists lump all ETFs together, says McClatchy, and essentially compare apples (unleveraged ETFs) to oranges (leveraged ETFs). This makes the list pretty much useless to anyone but a specialty trader. He suggests a simple solution: filter out the leveraged ETFs and list them elsewhere.

Other problems when it comes to evaluating ETFs are not understanding or giving too much weight to trading volume and not looking at assets under management differently.

The most insightful information when dealing with ETFs would regard the underlying holdings or asset class, such as macroeconomic trends, fundamental financial ratios, money flows, volatility, and investor sentiment. Investors do have several options when it comes to researching and understanding ETFs.

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.

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