We at Canal Capital Management are big believers in ETFs, otherwise known as Exchange Traded Funds, because of their salient characteristics: cheap, tax efficient, intra-day trading, index replicating, etc., But just like with any investment product, they are not all created equal. Due diligence is required when investing in any ETF. At our firm, we follow a disciplined process when vetting any investment, and ETFs are no exception. We apply the following test: Efficiency, Tradability & Fit. Efficiency looks at a fund’s costs, while Tradability assesses average daily trading volume, and Fit examines the securities the fund owns. Though it may sound corny, this mnemonic device describes a process by which we narrow down some 1,500 ETFs to a more manageable security universe of choices that will best fit our investment objectives.