Sharpely offers one of the most advanced ETF screening tools available to investors. With over 40 metrics for in-depth analysis, the sharpely ETF screener is your one-stop shop for creating insightful ETF screens. And on top of that, you can invest in the screen in a completely automated manner. Investing directly in a screen is covered here.
Next, we provide you with a detailed guide so that you can use the sharpely ETF screener to its full potential.
Before we move on to the screening user guide, it is important to understand the process of ETF screening.
ETF screening is used by both quantitative and qualitative investors to filter the list of ETFs that they want to invest in. The purpose of ETF screening is to narrow down the universe of funds to a more manageable number that fits specific investment strategies or goals.
Investors can use various factors (metrics) to screen ETFs, such as basic filters (AUM, expense ratio, benchmark), relative performance (alpha, quarterly and yearly consistency), portfolio measures (P/E ratio, P/B ratio, modified duration), and risk measures (fund volatility, category volatility, max drawdown).
For the screening of ETFs, trading volume is an important parameter. You will see that when you open the ‘Basic filters’ tab of the ETF screener. And factors like minimum SIP amount become irrelevant. So, they won’t be shown in the ETF screener. You can compare the ‘Basic filters’ tab of the MF and ETF screener below.
By applying these filters, investors can identify potential investment opportunities and make informed decisions about which funds to buy or sell.
ETF screening can be used for various purposes, such as finding underperforming funds, identifying funds with the lowest tracking error, selecting funds that match a particular investment style, or creating a diversified portfolio.
Let’s look at an example:
Suppose an investor wants to identify the best ETFs that track Nifty 50 TRI and have a low expense ratio.
She will start first by filtering the universe to only include ETFs that track Nifty 50 TRI. This narrows her universe to 17 funds out of 164 funds.
Next, she will filter funds that have a tracking difference (3Y) in the bottom 25% (her definition of what is consistent). This brings the list to 4 funds. Next, she will filter funds that have an expense ratio in the bottom 50% (again, her definition of cost-efficient funds). Now the list is down to 2 funds.
This process is called sequential screening where each filter is applied sequentially to the remaining list of funds.
In the next article, we will show you the step-by-step process to create your first ETF screen.