Tom Lydon, president of Global Trends Investments, says good ETFs have a reasonable expense ratio, a well-diversified underlying index and underlying stocks with lots of liquidity.

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The challenge for the architect of a bond ETF is to ensure that it closely tracks its respective index in a cost-effective manner, despite the lack of liquidity in the bond market.

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Among exchange traded funds holding a broad index of small companies, two stand out for low expense ratios and good liquidity: the Schwab U.S. Small Cap ETF ( SCHA ) and the Vanguard Small Cap ETF ( VB ).

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