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Step #3: Determine the timeframe.

First of all, you pick a time frame that you want to compare the ETF's performance to. I will generally use a 12-month period. However, if we've recently experienced a big drop in stock prices, I like to use a shorter time frame, typically three months.

The shorter time frame will tell me how the ETF behaved up to and during the period of market weakness, and that's the information I need in order to find the real champion.

Remember, in a bull phase, even a kitten can look like a tiger; it's in the bear phase that we find out who the real jungle cats are.

NEXT: Test the performance.