Given that ETFs are diverse in nature and low cost. How does one evaluate an ETF if its a good? What tools should you use and what should we be looking at in the quote?

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There are numerous studies that show that the most consistent performer has two components:

1. Fees, fees, fees.

Fees form a huge part of underperformance. Much of the mediocre return generated by mutual fund and other "alternative" ETFs are attributed toward higher cost structures.

Frictional costs are what contribute to mediocrity in most cases.

A very recent study on this, search "The Tax Benefits of Sepearting Alpha From Beta" shows that a ETF with tilt toward a particular strategy requires an additional alpha of 2.7% just to breakeven from a passively held low cost ETF fund.

2. Inconsistency in consistency

Often, an investment goal is derailed due to factors such as psyche and emotions. I have had clients who decided not to stick to their "passive" investments largely because they "believe" they could outsmart and time markets. The very dangerous path to this is that for the vast majority of people, we just simply do not possess the crystal ball skill to determine what will happen the next week or month.

Even on a valuation standpoint, buying an undervalued asset requires stubborness to see through years of underperformance because you are right but the market is wrong. Even Graham chose to buy "diversified" holdings of under valued companies because the undervaluation of asset could last far longer than your emotional psyche could wait.

You cannot be both successful and delusional.

Watch out for fees, stick to a strategy which you can consistently apply, and be patient.

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1. Fees

2. Composition of the ETFs i.e. number of stocks from the tracker index

3. Weightage of the component stocks i.e. equal weight or by size/value.

4. Alignment with your investment strategy i.e. markets you want to invest in

For index ETFs, just simply looked at their respective historical performance since the financial crisis 2008. A rule of thumb for me is that if till date the index had not recovered/exceed the pre-crisis drop levels, best to avoid it. Its a sign that the component stocks that constitue the index just aint dynamic and vibrant enough to shrug off setbacks