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Step #4: Test the performance.

Let's assume we are using the three-month time frame to test relative performance. What I will do is pick a date three months in the past. I will then use a chart service (www.bigcharts.com is an excellent free resource) to find out where the ETF was trading three months ago and where it is trading today.

When on Bigcharts.com, be sure to use the interactive chart feature. This will allow you to see the day's open, high, low and close. But for the purposes we're discussing here, only the closing price is important.

I'll then pull out my trusty calculator and figure out the ETFs' percentage performance over the last three months. I will do this for every ETF in the sector that I am interested in.

After you are done with this process, you will have the clearest picture possible of which ETF to buy. You're going to buy the strongest. That means you will buy the one up the most or the one down the least.

It's all part of making smarter investing choices. Here are more resources to help you do just that:

• 5 Rules for Profitable Trading
• 4 Investing Scam Warning Signs
• Where Should You Set Your Stop Loss?
• 52-Week Highs and Lows: Hype or Helpful?
• 6 Questions to Ask Before Choosing a Broker