Which ETFs or trackers should you choose? 5 tips for investing well
Updated on 29 July 2026
Choosing the right ETF means analysing the target asset class, currency risk, the fund's liquidity, and its tax compatibility (PEA or securities account). This article breaks down the 5 key criteria for building a diversified portfolio.
- Currency risk and the low liquidity of some niche ETFs are the two main drawbacks to watch before investing.
- Warren Buffett recommends his heirs allocate 90% to a stock index fund and 10% to short-term government bonds.
- The PEA (a French tax-advantaged equity savings account) caps contributions at €150,000 and exempts gains from income tax after 5 years, excluding social security contributions.
- A securities account lets you invest without a cap in US or international ETFs, unlike the PEA, which is limited to European equities.
Which criteria should you consider to choose a good ETF?
Choosing an ETF depends first on the target asset class (equities, bonds, commodities, currencies), currency risk, and the fund's liquidity.
The first question is which asset type you want exposure to: equities, bonds, commodities, currencies, and so on. Say you wanted to invest in gold, but market analysis showed it was too uncertain and volatile right now: choosing a commodities ETF, specifically one on precious metals, looks like a good compromise. The ETF will be less exposed to sharp swings. It quickly becomes clear that a short-term trading profile, the "scalper" or "day trader" type, is not compatible with investing in ETFs.
You can also read our article: What is an ETF?
ETF investors generally look for diversified exposure over the medium to long term, bearing in mind that any investment carries a risk of capital loss. They will typically hold their ETFs for several months, sometimes several years. Holding an ETF portfolio gives passive exposure to an index, with no guaranteed return. Choosing an index ETF also means spending less time on analysis than with individual stocks, where it matters to review a company's financial health. Take the insurance and travel sectors: it is entirely possible to invest in travel-insurance ETFs without analysing in detail the financials of every company inside the tracker. Your only responsibility is to know what your index ETF is made of and how it behaves in the market (chart analysis).
An ETF is listed on stock exchanges, just like a share. You can see its price and buy or sell it at any time. This offers great flexibility. ETF management fees are generally lower than those of actively managed funds.
ETFs have two main drawbacks:
- Currency risk: depending on the ETF, some are quoted in euros, others in dollars or another currency. As a European investor, you need to watch currency risk. If the dollar rises or falls against the euro, it will affect the value of your ETF portfolio. The simplest approach is to buy an ETF denominated in your country of residence's currency.
- Low liquidity in some cases: the most specific, niche ETFs can be very illiquid. That means few trades take place, making it harder to buy and sell them day to day. The safest approach is still to build your portfolio around large, well-established ETFs.
What is Warren Buffett's advice on ETFs?
In his 2013 Berkshire Hathaway shareholder letter, Warren Buffett explains that he instructed the trustee of his wife's estate to put 90% of the capital in a low-cost S&P 500 index fund and 10% in short-term government bonds. It is not the strategy he applies himself, since he practises "value investing": buying undervalued stocks and waiting months, even years, for them to gain value. He nonetheless recommends this allocation to investors less experienced than himself.
Warren Buffett has said that "rule number one is never lose money, and rule number two is never forget rule number one." Uncertainty should be minimised, especially for beginners. ETFs tracking broad indices (S&P 500, CAC 40) offer significant diversification that reduces the risk tied to a single company, without eliminating market risk altogether. In his view, diversification and simplicity are central to investing in ETFs, bearing in mind that no investment is risk-free.
For purely illustrative and educational purposes, here is an example of a diversified ETF allocation. This example is neither a recommendation nor personalised investment advice:
| ETF | EXPOSURE EXAMPLE |
|---|---|
| 20 % : Amundi Core STOXX Europe 600 UCITS ETF Acc | Investing in the European market |
| 20 % : Amundi PEA S&P 500 UCITS ETF Acc | Exposure to large-cap US stocks |
| 15 % : Amundi ETF PEA JAPAN TOPIX | The diversity of major Asian companies it contains |
| 15 % : Amundi ETF PEA MSCI Emerging Markets UCITS ETF | Investing in emerging markets through an ETF |
| 10 % : Amundi MSCI AC Asia Pacific Ex Japan UCITS ETF Acc | Diversified exposure to Asia-Pacific markets excluding Japan |
| 10 % : Amundi Index MSCI World SRI PAB UCITS ETF DR (C) | Investing in environmentally responsible companies |
| 10 % : Amundi EUR Overnight Return UCITS ETF | Investing in European money-market funds |
Which stock market indices should you follow?
The most closely followed indices are the S&P 500 in the United States, the CAC 40 in France, the STOXX Europe 600 across Europe, and the Nikkei 225 in Japan.
In the end, you won't need to follow market news daily once your ETF portfolio is built. Still, it's worth reviewing certain stock market indices before investing. If you want to buy an S&P 500 ETF that tracks the S&P 500 (the index of the 500 largest US companies), you should at least look at that index's historical performance. Going back to the travel-insurance ETF example, you would need to analyse not just that ETF but also how certain large stocks behave, to better understand the associated risk.
Once this upfront chart analysis is done, you can let your portfolio run its course without tracking stock indices every day. You can come back to it whenever you want to sell. That's the whole advantage of investing in an ETF over the long term.
Are ETFs compatible with a securities account and the PEA?
Yes: ETFs are compatible with both the PEA and the securities account, provided you choose trackers eligible for each wrapper. The PEA (a French tax-advantaged equity savings account) is a tax-advantaged investment wrapper reserved for French tax residents. There are 3 conditions for holding a PEA:
- Be of legal age;
- Be a French tax resident;
- One PEA per person, maximum 2 per tax household.
Source: service-public.gouv.fr, PEA: opening conditions, accessed 29 July 2026.
The PEA contribution cap is €150,000, though the PEA's value can exceed that amount thanks to investment returns. After 5 years of holding, gains made within the PEA are exempt from income tax, with social security contributions still due. Only certain targeted French and European stocks can be bought.
For those who want to buy US stocks, you'll need to open a securities account to buy specific ETFs or the stocks directly. Both the PEA and the securities account are compatible with ETFs. Holding a PEA alongside a securities account has the advantage of letting you buy foreign ETFs in the securities account and French ETFs in the PEA, depending on the tax treatment of each wrapper.
You can also read our article: PEA ETF guide: our pick of the best
Diversification, the ETF investor's best ally
Take the time to think about which tracker to choose. Depending on your interests, your disposition, and your risk aversion, you'll pick the ETFs you understand best. ETFs let you pool part of the specific risk through diversification, without fully removing systemic risk. Feel free to ask for advice on the Finary community
Frequently asked questions
What is the difference between an ETF and a tracker?
ETF and tracker refer to the same financial product: a listed fund that replicates the performance of an index, whether equities, bonds, or commodities. ETF (Exchange Traded Fund) is the official name; "tracker" is simply its common name in French.
Is an ETF eligible for the PEA?
Some ETFs are eligible for the PEA, notably those that directly replicate European equity indices, as well as synthetically replicated ETFs that track non-European indices (United States, Japan, emerging markets) while still being held within the PEA's tax wrapper.
How many ETFs do you need to diversify a portfolio?
There's no universal number, but a portfolio of 5 to 8 ETFs covering different geographic zones (Europe, United States, Asia, emerging markets) and asset classes (equities, bonds, money market) already achieves satisfactory diversification for an individual investor.
What fees should you watch on an ETF?
The main fee is the TER (annual management fee), typically between 0.07% and 0.60% depending on the index tracked and how specialised it is. Brokerage fees charged on buying and selling are added on top, depending on the broker used.
Should you prefer a physically or synthetically replicated ETF?
A physically replicated ETF actually buys the securities of the index it tracks, while a synthetic ETF uses a swap agreement with a bank counterparty. Both methods are governed by the UCITS regulation (harmonised European funds), with different fees and counterparty risk.
Sources
Service-public.gouv.fr, PEA: opening conditions, cap and taxation
Berkshire Hathaway, 2013 shareholder letter
JustETF, Amundi Core STOXX Europe 600 UCITS ETF factsheet
JustETF, Amundi PEA S&P 500 UCITS ETF factsheet
JustETF, Amundi ETF PEA Japan TOPIX factsheet
JustETF, Amundi ETF PEA MSCI Emerging Markets factsheet
JustETF, Amundi MSCI AC Asia Pacific Ex Japan UCITS ETF factsheet
JustETF, Amundi Index MSCI World SRI PAB UCITS ETF factsheet
JustETF, Amundi EUR Overnight Return UCITS ETF factsheet
AMF, PSCA (CASP) white list, Finary SAS
Regulatory disclaimers: Marketing communication. Investing carries a risk of partial or total capital loss. Past performance is not a reliable indicator of future performance. This article is provided for information and educational purposes only; it does not constitute personalised investment advice, a buy or sell recommendation, or tax advice.
Before investing, read the Key Information Document (KID) and, where relevant, consult an authorised adviser.
Finary SAS, an investment firm authorised by the ACPR (no. 19283), member of AMAFI. Insurance broker registered with ORIAS (no. 21001279), member of the CNCGP (association approved by the AMF). Crypto-Asset Service Provider (CASP) authorised by the AMF under the MiCA regime, references no. A2026-026 and no. N2026-008.
