More exchange traded fund (ETF) lingo to help you swim, not just float, the investment waters. Morningstar highlights:
- Return On Equity – This measure will give insight into the efficiency of a firm’s management. Does it have a superior business model?
- Price/Prospective Earnings – This represents the price investors are paying for each dollar of expected earnings per share. Prospective earnings are based upon a consensus analysts opinion of how much that company will earn for the fiscal year. For an ETF it is computed by a weighted average of the ratio of all its holdings.
- Price/Earnings – The most widely quoted price multiple, giving investors an idea of how much they are paying for a company’s earnings power. It is computed by dividing a stocks current market price by its trailing 12 month earnings per share.
- Average Daily Volume – Average number of shares traded each day. Gives a general idea to the popularity of the ETF.
- Expense Ratio – Shows the percentage of assets that are consumed by a funds operating, administrative, and management fees. An important data point for discerning each ETF.
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.