How to Choose the Right ETF

🔵 Five Criteria That Actually Matter

You know what ETFs are and why they are useful. But with thousands available, how do you choose the right ETF for your portfolio? This article gives you a practical framework for evaluating and selecting ETFs — based on five factors that actually matter.

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The Five Factors That Matter

When comparing ETFs, focus on these five criteria. Everything else is secondary.

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1. What Does It Track?

Every ETF follows an index — and that index defines what you are investing in. The most important decision is not which ETF provider to use, but which part of the market you want to own.

Broad market (most diversified):

• MSCI World — ~1,280 companies, 23 developed countries
• FTSE All-World — ~4,000 companies, developed + emerging markets
• MSCI ACWI — ~2,510 companies

Regional:

• S&P 500 — 500 largest US companies
• MSCI Emerging Markets — ~1,180 companies from Taiwan, China, South Korea, India, Brazil, etc.
• SET50 / SET100 — 50 or 100 largest Thai-listed companies

Sector or theme:

• Technology, healthcare, clean energy, real estate — focused on one industry
• Higher concentration risk, higher potential reward

For most beginners: A single broad-market ETF (MSCI World or FTSE All-World) is the strongest starting point. It gives you global diversification in one purchase. You can add regional or sector ETFs later if you want more specific exposure.

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2. How Much Does It Cost?

The expense ratio (TER) is the annual fee you pay for holding the ETF. It is deducted automatically from the fund’s value — you never see a bill, but it reduces your return every year.

ETF type	Typical TER
Broad market ETFs	0.05% – 0.25%
Regional ETFs	0.10% – 0.50%
Thai-listed SET ETFs	e.g. 0.40% and 0.86% for two ETFs tracking Thai indices
Sector / theme ETFs	0.30% – 0.75%
Actively managed ETFs	0.50% – 1.50%

The impact over time:

On ฿1,000,000 invested over 20 years at 6% gross return:

TER	Final value
0.10%	≈ ฿3,147,000
0.50%	≈ ฿2,918,000
1.00%	≈ ฿2,653,000

The difference between 0.10% and 1.00% is about ฿494,000 — same amount, same period, same gross return. The only difference is cost.

Rule of thumb: For broad market exposure, do not pay more than 0.30% TER. There is almost always a cheaper option that tracks the same index. The 0.30% rule of thumb applies to international broad-market ETFs, not to SET-listed products.

TER is only one of two cost layers. The TER is the same worldwide; on top of it you pay Thai trading costs per order: broker commission (a percentage of trade value that varies by broker and channel), plus SET trading fee 0.005%, TSD clearing fee 0.001% and regulatory fee 0.001%, plus 7% VAT on commission and fees. Offshore accounts add an FX conversion spread. A 0.10% TER fund traded frequently in Thailand can cost more than a 0.30% TER fund held for years.

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3. How Big Is the Fund?

Fund size (Assets Under Management / AUM) matters for two practical reasons:

Liquidity: Larger funds are easier to buy and sell without affecting the price. Very small funds (under $50 million) can have wider bid-ask spreads, which increases your trading cost.

Survival: Very small funds risk being closed by the provider if they are not profitable to operate. If a fund closes, you get your money back — but it forces an unplanned sale, potentially at a bad time.

Guideline: Prefer ETFs with at least $100 million in AUM. Above $500 million is ideal. This is rarely a problem with major broad-market ETFs, but becomes relevant for niche or thematic funds.

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4. Where Is the Fund Based?

ETFs can be domiciled (legally registered) in different countries. For investors accessing ETFs through a Thai broker, the domicile affects taxes and accessibility.

Ireland-domiciled ETFs (UCITS):

• Most common for non-US investors
• Lower US dividend withholding tax (15% instead of 30%) due to the Ireland-US tax treaty
• Available through most international brokers and via DR/DRx on Thai platforms
• ISIN starts with “IE”

US-domiciled ETFs:

• Directly listed on US exchanges (NYSE, NASDAQ)
• Subject to 30% US dividend withholding tax for non-US investors
• Often the lowest TER available — the cheapest US-domiciled broad-market ETFs currently charge around 0.03% per year
• Available through Thai brokers offering US stock access

A second, often overlooked point: US-listed securities are US-situs assets. For a non-US investor who dies holding them, the US estate tax exemption is only USD 60,000, with rates up to 40% above that. Thailand has no estate tax treaty with the US, so no relief applies. Ireland-domiciled UCITS ETFs are not US-situs and avoid this exposure.

Thai-domiciled funds:

• Regulated by Thai SEC
• Bought and sold in Baht, so you do not convert currency yourself. Foreign investment funds (FIF) still hold foreign assets, so the currency risk remains unless you choose a hedged share class.
• Often higher fees than international equivalents
• Tax advantages may apply: RMF (up to 30% of assessable income, max ฿500,000, shared limit with provident fund and pension insurance) and Thai ESG funds (up to 30%, max ฿300,000 for purchases from 1 Jan 2024 to 31 Dec 2026, separate limit, 5-year holding). SSF units bought before 2025 keep their benefit, but no new SSF deductions are available since 1 January 2025.

For most investors using a Thai broker: Ireland-domiciled UCITS ETFs offer the best combination of tax efficiency, accessibility, and cost. US-domiciled ETFs are cheaper but tax-disadvantaged for non-US investors.

Thai tax layer: if you are a Thai tax resident (180+ days), foreign-sourced income you remit into Thailand is assessable at progressive rates (0–35%) under Departmental Instruction Por. 161/2566, regardless of the year it was earned. Income earned before 1 January 2024 stays exempt under Por. 162/2566. The proposed two-year remittance grace period is still a draft and is not in force as of 2026. Accumulating ETFs avoid a yearly cash payout, but Thai tax is triggered by remittance, not by the fund structure. Capital gains on SET-listed securities (including DR/DRx) are tax-exempt for individuals; Thai dividends carry 10% withholding tax.

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5. Accumulating or Distributing?

ETFs handle dividends in one of two ways:

Accumulating (Acc): Dividends are automatically reinvested into the fund. Your units grow in value over time. No cash payout, no action needed from you. Better for long-term growth and potentially more tax-efficient.

Distributing (Dist): Dividends are paid out to your brokerage account as cash — monthly, quarterly, or annually. You decide what to do with the cash. Provides regular income but requires you to reinvest manually if you want to compound.

For long-term wealth building: Accumulating is generally more efficient — automatic reinvestment means compound interest works without your intervention. Choose distributing only if you specifically need regular income from your investments.

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Putting It Together — A Practical Example

Imagine you want a simple, globally diversified stock portfolio. Here is how you might apply the five criteria:

Criterion	Choice
Index	FTSE All-World (broad, global, ~4,000 companies)
TER	under 0.25%
Fund size	over $1 billion
Domicile	Ireland (UCITS)
Type	Accumulating

Result: One ETF. Globally diversified. Low cost. Automatic reinvestment. Tax-efficient structure.

You do not need five ETFs to be diversified. One well-chosen broad-market ETF achieves more diversification than most people’s entire portfolios.

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Common Mistakes When Choosing ETFs

Choosing based on recent performance. An ETF that returned 40% last year is not necessarily a good choice — it might be concentrated in a sector that happened to do well. Past performance does not predict future returns.

Overcomplicating with too many ETFs. Three broad ETFs (global stocks, emerging markets, bonds) is more than enough for most investors. Ten ETFs with overlapping holdings does not improve diversification — it just makes your portfolio harder to manage.

Ignoring currency exposure. When you buy a global ETF through a Thai broker, you are exposed to currency movements (Baht vs Dollar vs Euro). Currency movements can add to or subtract from your return over any period, including long ones. Hedged share classes exist but cost more; decide based on when you will need the money in Baht, not on a short-term view of the exchange rate.

Confusing the provider with the product. Many fund providers offer ETFs tracking the same indices. The differences between providers are usually tiny — focus on the index, fee, and structure, not the brand name.

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Key Takeaways

• What the ETF tracks (the index) is the most important decision
• Keep costs low — under 0.30% TER for broad market exposure
• Choose funds with at least $100 million in assets
• Ireland-domiciled UCITS ETFs are generally most tax-efficient for non-US investors
• Accumulating ETFs are better for long-term wealth building
• One well-chosen broad-market ETF is a complete equity portfolio

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Frequently Asked Questions

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→ Read next: Investment Fees Explained — Why costs matter more than you think.