Teeka Tiwari

Finding the Best ETFs to Trade

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First of all, you pick a specific time frame during which you want to compare the funds' performance. I will generally use a 12-month period. However, when we've had a big drop in stock prices (such as we do now), I like to use a shorter time frame, typically three months.

The shorter time frame will tell me how the ETF behaved up to and during the period of market weakness, and that's the most effective way to get the information I need in order to find the real champion. Remember, in a bull phase, even a kitten can look like a tiger; it's in the bear phase when we find out who the real jungle cats are.

Next I use a chart service to find out where the ETF was trading three months ago and where it is trading today. (BigCharts.com is an excellent free resource. When on BigCharts, be sure to use the interactive chart feature. This will allow you to see the day's open, high, low and close. For this purpose, only the closing price is important.)

I'll then pull out my trusty calculator and figure out the ETFs' percentage performance during the past three months. I will do this for every ETF in the sector that I am interested in.

After you are done with this process, you will have the clearest picture possible of which ETF to buy. You would want to buy the one that's up the most (or the one down the least) and short the worst performers of the bunch.

Teeka Tiwari is the Chief Investment Officer for Tycoon Publishing's Point & Profit. To learn more about him, read his bio.