There are now officially more ETF's than there are individual listed stocks. That is how popular ETF's have become. Now, picking a stock was hard enough, and that's what drove investors to use ETF's that make their investment selection easier, but now that there are more ETF's than stocks how do you know which one is good for you? You may have a particular sector in mind, or a particular index in mind but when you do some research you find that there are hundreds of choices. Want to invest in a commodity? There are so many offerings it can be overwhelming so today we will help you focus in.
The first question I would ask is what are you planning to do with this ETF? Is this a long term hold for you, or would you like to trade in and out of it as it swings up and down? Maybe you are a day trader and just want a vehicle you can trade every day rather than hunting for the "hot" stock? First understand what you want to do with the ETF and that can thin out the list dramatically.
If you are planning on a long term hold then you will likely be focused on the overall cost of the ETF. What does the ETF charge for their offering. If you are looking to invest in an index ETF then a quick google search will help you narrow down the ETF's by cost.
If you are looking to trade around the ETF then volume will be your number one concern. The cost of the ETF will be less of an issue as you will be more active in your approach. Sort the ETF list you want to focus on by volume and only work with the top few choices. If you like to use options then you will want to check which of those top few have the options volume.
For day traders there are really only a few good choices for ETF's that are active enough to use. Consider using the original ETF (NYSE: SPY) for the S&P 500, the (NASDAQ: QQQ) for the Nasdaq 100, and maybe the (NYSE: DIA), and (NYSE: IWM) for the Dow and Russell 2000. Volume and volatility are your friends here and those four choices will defiantly give you what you are looking for.