If you’re looking for ETFs to invest in for the best portfolio returns, then let these five tips guide your search.

Here are five tips to use when considering ETFs to invest in.

1. The best ETFs to invest in practice “passive management”

Traditional ETFs are “passive” investments that generally have a lower MER (Management Expense Ratio) than conventional mutual funds, or even ETFs that rely on active management. That’s because most ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF providers invest so as to mirror the holdings and performance of a particular stock-market index.

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ETFs practice “passive” fund management, in contrast to the “active” management that conventional mutual funds provide at much higher costs. Traditional ETFs stick with this passive management—they follow the lead of the sponsor of the index (for example, Standard & Poors). Sponsors of stock indexes do from time to time change the stocks that make up the index, but generally only when the market weighting of stocks change. They don’t attempt to pick and choose which stocks they think have the best prospects.

This traditional, passive style also keeps turnover very low, and that in turn keeps trading costs for your ETF investment down.

2. The best ETFs to invest in provide broad exposure—and lower fees

Investors get the broad market exposure of a traditional mutual fund, plus the ability to trade at will with nominal fees. The best ETFs represent a low-cost, tax-efficient way for investors to make money in the long term.

Investors can buy ETFs via stock exchanges on margin or sell them short. The best ETFs offer well diversified, tax-efficient portfolios with exceptionally low management fees. Investors large and small use ETFs to build well-diversified portfolios.

ETFs have evolved, and competition has increased. Still, you need to be very selective with your ETF holdings.

3. Looking for ETFs to invest? Avoid hedged ETFs

Adding more features (sometimes referred to as “wrinkles” or “bells & whistles”) can make investing in ETFs appear attractive to a wider range of investors. But mostly, adding features adds profit opportunities for the sponsoring institution.

For example, consider a typical ETF that gives you exposure to stocks from an emerging market. This may appeal to investors interested in that specific market. But conservative investors may hesitate to buy, because they worry about currency movements in the emerging market. So, the financial industry has come up with “hedged” ETFs.

Hedging costs will vary, depending on conditions in the foreign-exchange market, and on how an ETF carries out its hedging program. But most important, these fees can double or triple the typical 0.30% to 0.70% ETF management fee.

4. ETFs are great options for building in-trust accounts

Exchange-traded funds are some of the best investments to choose as a starting point when building an in-trust account. If you start out with exchange-traded funds, we recommend putting, roughly half of your contributions into a Canadian exchange-traded fund and the remaining half into an exchange-traded fund holding U.S. stocks. ETFs, with their relatively low management fees (MERs), have in large part eclipsed interest in mutual funds. As well, new commission-disclosure requirements in Canada have forced brokers to reveal all the costs associated with mutual funds and other similar investments. That has begun to increase the appeal of ETFs.

5. ETFs are cheaper in many ways than mutual funds

Overall, high management fees eat into an investor’s long-term profits. That’s especially true with mutual funds. ETFs are among the more benign investment innovations of our time. Unlike other innovations, they don’t load you up with heavy management fees, nor tie you down in some cases with heavy redemption charges if you decide to get out before six years have passed. Instead, they give you a lower-cost and more flexible and convenient alternative to mutual funds.

The best ETFs have similar characteristics and benefits. What is the primary benefit you see in them aside from low fees?