According to InvestmentNews, the list of the top ten funds researched by financial advisors last year is based on information given by Morningstar.

1. iShares Barclays TIPS Bond (NYSEArca: TIP). With an expense ratio of 0.20%, advisors sought out this ETF for its cheap exposure to Treasury inflation-protected securities. If inflation rises, investors should consider switching regular bonds like Treasuries to Treasury Inflation-Protected Securities (TIPS). TIPS bond’s principal and interest payments grow with inflation. [More on TIPs.]



2. SPDR Gold Shares (NYSEArca: GLD). GLD has produced double digit returns in four of the five past years. Gold prices have been rising because currencies the world over are mostly in a weakening phase and governments are printing money fast and furiously. Experts are predicting that gold investment this year is going to soar, thanks to another year full of potential financial uncertainties. [More on Gold.]



3. iShares MSCI EAFE Index ETF (NYSEArca: EFA). Another popular choice of advisors. The fund was up 27% last year and it has an expense ratio of 0.35%. The argument for investing globally is based on low correlations – if one area of the world tanks, another may be thriving. Investing overseas gives you diversification away from U.S. assets. [How Being Under-allocated Globally Could Hurt.]



4. iShares MSCI Emerging Markets (NYSEArca: EEM). Last year, international stock markets were all the rage, sparking billions of dollars of inflows into ETFs. The MSCI index provider managed to nab about 70% of that money. [More on Emerging Markets.]



5. iShares iBoxx $ Investment Grade Corporate Bond (NYSEArca: LQD). LQD has produced positive returns in each of the last seven years. Corporate bond spreads are the highest they’ve been since November, rising at the fastest pace in more than two months. The spike is on the heels of concerns that the state of government finances will hinder the recovery and make it more challenging for companies to make their debt payments. [More on Corporate Bonds.]



6. iShares Barclays Aggregate Bond Fund (NYSEArca: AGG). AGG provides exposure to government bonds, government-sponsored bonds (Fannie and Freddie, etc.), and corporate bonds. The bond and bond-related ETF markets have experienced quite a year, but the good times may soon come to an end. The specter of inflation and likely hikes in interest rates may cut away at hefty returns seen in  recent months. [Bond ETFs: Good Times Ending?]



7. PowerShares DB Commodity Index (NYSEArca: DBC). Commodities are still a good way to diversify an otherwise bland portfolio, but before you invest, assess your risk tolerance and act accordingly. If you want more safety, check out broad commodity funds that give you exposure to a diversified basket of commodities. The downside is that you won’t fully capitalize if any one commodity is performing particularly well. [More on Commodities.]



8. Vanguard Emerging Markets ETF (NYSEArca: VWO). Productivity in the emerging markets is improving. Emerging markets also enjoy a higher level of economic freedom. Economic freedom measures how free citizens of a particular country are to work, produce, consume and invest how they please. Emerging markets account for 50% of global gross domestic product, and counting. In fact, between 2008 and 2025, developing economies are projected to account for more and more of global GDP. [Reasons to Stick with Emerging Markets.]



9. iShares COMEX Gold Trust (NYSEArca: IAU). Gold prices more than doubled over the past few years. Gold may soar higher because of inflationary worries, higher investment demand in gold, Central Banks hoarding gold, potential for a currency crisis and any signs of major currency devaluations. [Reasons Gold May Still Have Life.]



10. SDPR S&P 500 (NYSEArca: SPY). SPY is one of the go-to ETFs for exposure to the broader market. The S&P 500 is made up of 500 of the largest companies that are publicly traded in the United States. This is the index that is most watched by professional traders. SPY is extremely liquid, currently averaging more than 166 million shares per day. [Indexes ETF Investors Should Know.]

For full disclosure, some of Tom Lydon’s clients own shares of EEM.

Max Chen contributed to this article.

A global portfolio offers diversification and exposure to fast-growing economies. But that’s not all:

• Gains by U.S. investors in overseas markets have enjoyed a “dollar kicker” when assets are repatriated to U.S. dollars
• Country-focused ETFs are a good way to aim a portfolio at weighting countries more on growth potential rather than market capitalization; this way, any growth potential is harnessed and none of those gains are left out
• Single country funds also make plays upon other areas; for example, Australia can give good exposure to commodities, and is in the position to spot most of China’s growth; Singapore’s ETF also has high exposure to industrials and telecommunications
• By using the single-country ETFs, it is possible to challenge the larger conventional indexes, and still garner the diversification and gains.

Not everyone is so keen to go overseas, though. Some believe that government debt problems in Europe and a growth slowdown in China and other emerging markets may make investing in the United States a safer bet for the year, reports Aldo Svaldi for The Denver Post. Additionally, the U.S. dollar is appreciating, which makes investing abroad less lucrative. [10 Tips for Going Global.]

Bill Gross, co-chief investment officer at PIMCO, increased holdings of non-dollar developed-market debt in January for the third consecutive month, writes Wes Goodman for BusinessWeek. Gross urges investors to seek opportunities in “less levered” countries like China, India and Brazil, and search out nations “where national debt levels are low.” [ETFs to Play the World Economic Recovery.]

For more information on emerging markets, visit our emerging market category.

• Vanguard Emerging Markets (NYSEArca: VWO)

• iShares MSCI Emerging Markets (NYSEArca: EEM)

• Vanguard FTSE All World-Ex US ETF (NYSEArca: VEU)

• iShares MSCI EAFE Index ETF (NYSEArca: EFA)

• SPDR S&P Emerging Markets (NYSEArca: GMM)

• Schwab Emerging Equity Markets ETF (NYSEArca: SCHE)

The GlobalShares FTSE Developed Countries ex U.S. Fund (NYSEArca: GSD) is based on the EAFE index. It would compete with the iShares MSCI EAFE Index ETF (NYSEArca: EFA) and the Vanguard Europe Pacific ETF (NYSEArca: VEA).

According to Cinthia Murphy for Index Universe, GSD is as price competitive as EFA, with expenses pegged at 0.35%, but EFA is more liquid and faces very low volatility, which makes it a solid bet for investors looking for foreign exposure. VEA, on the other hand, has $6.1 billion in assets and charges 0.16% in fees. The portfolio mixes are nearly identical in both funds.

GSD has Canada in the line-up of 23 countries represented, which automatically sets it apart from the rest. Old Mutual, an established player in the mutual fund market, is expected to roll out in the coming weeks another three international ETFs, currently in registration.

Also of note is that Jefferies who is coming out with two derivatives-based commodities ETFs. The funds will give long-only exposure to 19 commodities by using futures contracts. The commodities will include aluminum, cocoa, nickel, natural gas, soybeans, gasoline and wheat. Each fund has a 0.75% expense ratio. Cinthia Murphy for Index Universe says the ETFs to look out for are:

• Jefferies TR/J CRB Commodity Index ETF (NYSEArca: CRB)
  
• Jefferies Commodity Real Return ETF (NYSEArca: RRET)

For more stories about new ETFs,visit our new ETFs category.

The United States may make up only 42% of the global equity markets, but the average American investor keeps 72% of stock assets in the United States, or what local companies call “home bias,” reports Jason Zweig for The Wall Street Journal.

When American investors did invest overseas, they go “lopsided,” Zweig says, largely jumping at emerging markets. Around 95% of the $25 billion in U.S investor money finding its way into countries like Brazil, Russia, India and China during 2009. By 2010, around $300 billion was directly invested in the developing world, and maybe another $110 billion indirectly. [Reasons to Stick With Emerging Markets.]

The average fund investor’s portfolio includes an allocation of around 68% in the United States, 6% in emerging markets and 26% everywhere else. The MSCI’s All Country World Index approximated that all of the world’s investors have placed around 42% in the United States, 45% in developed foreign markets and 13% in emerging markets. [Indonesia ETF: BRIC Material?]

The argument for investing globally used to be based on low correlations – if one area of the world tanks, another may be thriving. However, in  2008, stocks around the world plummeted, and during 2009, stocks around the world rose in unison.[Why the IMF Is Bullish On India's ETFs.]

Correlation between foreign and U.S. stocks now stands above 90%. There are better reasons to invest globally now, though:

• Holdings are denominated in other currencies. By holding investments in another currency, an investor has a safeguard against possible devaluations of the dollar.
• Investing overseas gives you diversification away from U.S. assets. You wouldn’t work at General Motors and have your portfolio consist entirely of GM stock (would you?). Talk about having all your eggs in one basket. [6 Things You're Missing If You Don't Have Global ETFs.]

Zweig suggests thinking about international investing the same way you would domestic – look at sectors, growth, value and various asset classes. But whatever you do, be sure that international markets are a part of your overall portfolio, or you could wind up missing the boat.

For more information on international investments, visit our global ETFs category.

Among the many global ETFs investors have to choose from these days include these broad funds:

• Vanguard FTSE All World-Ex US ETF (NYSEArca: VEU)
• iShares MSCI EAFE Index ETF (NYSEArca: EFA)
• iShares MSCI All Country Asia Ex-Japan ETF (NYSEArca: AAXJ)
• Vanguard Emerging Markets ETF (NYSEArca: VWO)
• iShares MSCI Emerging Markets (NYSEArca:EEM)
• EGS Dow Jones Emerging Markets Titans Composite (NYSEArca: EEG)
• SPDR S&P Emerging Markets (NYSEArca: GMM)
• Schwab Emerging Equity Markets ETF (NYSEArca: SCHE)
• GlobalShares FTSE Emerging Markets Fund (NYSEArca: GSR)

Max Chen contributed to this article.

Fidelity has lowered its commission to $7.95 on trades through its site. And if you opt to trade certain iShares ETFs, commissions are completely free. The 25 iShares funds offered up for commission-free trading cover a range of major indexes and asset classes, including:

• iShares MSCI Emerging Markets (NYSEArca: EEM)
• iShares MSCI EAFE Index Fund (NYSEArca: EFA)
• iShares Barclays Aggregate Bond Fund (NYSEArca: AGG)
• iShares Russell 2000 Index Fund (NYSEArca: IWM)

For a full list of the free ETFs, click here.

Paul Justice at Morningstar says that Fidelity likely selected the iShares ETFs it did because they’re important to building strong core portfolios and tend not to be heavily traded by smaller investors. The hope is that Fidelity will lure investors looking for free iShares trades and then keep them around to trade other products.

The new, lowered commission will slash trading costs for Fidelity’s smaller customers by 60%. Commissions had been as high as $19.95. Here’s the catch: to take advantage of the savings, customers must trade at Fidelity.com and have at least $2,500 in taxable accounts. The partnership could be a strongly competitive alliance: iShares holds 50% of the ETF market share.

Fidelity’s lower prices are just the latest in the ETF price wars. When Schwab unveiled its new ETFs, it announced that all its proprietary funds would be commission free when traded at Schwab. The brokerage also lowered commissions for all trades to $8.95. [Schwab's ETFs opening doors.]

Other brokerages are also offering appealing deals. TD Ameritrade charges $9.99 a trade, E*Trade charges $12.99 to customers with less than $5,000 in assets. [How low can fees go?]

Fidelity’s announcement could be a harbinger of what’s to come: there’s going to be a race with the big discount brokers to offer competitive pricing because ETFs are no longer small fry. In fact, ETF trading now accounts for 50% of all trading on exchanges.

Brokerages are in heated competition for ETF assets from both advisors and individual investors.

We’re getting ever closer to having discount brokerages offer “ETF supermarkets,” where you’ll eventually be able to trade a majority of ETF commission-free.

Although the pace may eventually slow down, Barron’s reports that emerging markets still have room left to grow in the long haul. And for the time being, they may be the place to hide out as developed markets still work toward normalcy. In the near-term, growth rates in developed nations are expected to be lackluster, and much less robust than those in the developing world’s. (What you’re missing when you’re not globally invested).

Countries that are resource rich and developing are stockpiling cash and shoring up their balance sheets for a strong recovery and a growth spurt unlike any seen before. Earnings and  economic activity have been revived. Morgan Stanley feels that earnings in emerging markets have bottomed in the third quarter and they’re now set to climb again. (Why frontier markets could be even bigger).

For more stores about emerging markets, visit our emerging markets category.

There are a variety of ways to play emerging markets. There are broad funds, such as iShares MSCI Emerging Markets (NYSEArca: EEM), Vanguard Emerging Markets (NYSEArca: VWO) and iShares MSCI EAFE Index (NYSEArca: EFA).

There are funds that focus on regions, such as Claymore/BNY Mellon BRIC (NYSEArca: EEB) and BLDRSAsia 50 ADR Index (Nasdaq: ADRA).

Finally, there are single-country funds, such as iShares MSCI Brazil (NYSEArca: EWZ) and Market Vectors Vietnam (NYSEArca: VNM).

Keep in mind that the narrower you get in your exposure to emerging and frontier markets, the higher your risk will be. Be sure to have an entry and exit strategy before you invest. (How to follow trends).

ETF trading volume jumped from $142 billion in 2004 to $3 trillion in 2008, and settling around $1.4 trillion in June 2009, write Yan Zilbering and Donald Bennyhoff for IndexUniverse. Since 2008, nost of the ETF trading volume has been centered around a narrow selection of ETFs from the 850 or so available as of June 2009.

The top 20 most heavily traded ETFs by dollar volume amount to around 80% of total ETF trades. At the forefront are the most established ETFs with the most assets that are popular among investors of all types. The included ETFs account for about 50% of all ETF trading volume and they track the most common, broad-based domestic indexes:

• SPDRs S&P 500 (SPY): avg. daily turnover since Jan. 2008 is 43%
• PowerShares QQQ (QQQQ): avg. daily turnover since Jan. 2008 is 43%
• iShares Russell 2000 Index (IWM): avg. daily turnover since Jan. 2008 is 54%
• DIAMONDS Trust, Series 1 (DIA): avg. daily turnover since Jan. 2008 is 28%

There are also a group of nine narrowly focused sector and sub-sector ETFs, which represent around 16% of ETF trades, used to implement various strategies through the easy access of specific areas of the market.

• Financial Select Sector SPDR (XLF): avg. daily turnover since Jan. 2008 is 45%
• Energy Select Sector SPDR (XLE): avg. daily turnover since Jan. 2008 is 40%
• Oil Services HOLDRs (OIH): avg. daily turnover since Jan. 2008 is 54%
• SPDR Gold Shares (GLD): avg. daily turnover since Jan. 2008 is 6%
• iShares Dow Jones US Real Estate (IYR): avg. daily turnover since Jan. 2008 is 58%
• iShares MSCI EAFE Index (EFA): avg. daily turnover since Jan. 2008 is 4%
• iShares MSCI Emerging Markets Index (EEM): avg. daily turnover since Jan. 2008 is 12%
• iShares FTSE/Xinhua China 25 Index (FXI): avg. daily turnover since Jan. 2008 is 20%
• iShares MSCI Brazil Index (EWZ): avg. daily turnover since Jan. 2008 is 18%

The last set includes seven leveraged ETFs, which produce the multiple or inverse returns of the broad market or sector. This group is usually used for capitalizing on the short-term movements in the markets.

• Ultra S&P500 ProShares (SSO): avg. daily turnover since Jan. 2008 is 61%
• UltraShort S&P500 ProShares (SDS): avg. daily turnover since Jan. 2008 is 109%
• Ultra QQQ ProShares (QLD): avg. daily turnover since Jan. 2008 is 90%
• UltraShort QQQ ProShares (QID): avg. daily turnover since Jan. 2008 is 178%
• UltraShort Financials ProShares (SKF): avg. daily turnover since Jan. 2008 is 242%
• Direxion Daily Financial Bull 3X Shares (FAS): avg. daily turnover since Jan. 2008 is 128%
• Direxion Daily Financial Bear 3X Shares (FAZ): avg. daily turnover since Jan. 2008 is 241%

By looking at the data, it is noticeable that the more heavily traded ETFs traded at a higher turnover rate. ETFs tracking volatile sectors have been traded at even higher levels.

Max Chen contributed to this article.

A few tips, courtesy of both ETF Trends and John Spence for MarketWatch:

• The so-called plain-vanilla ETFs are the funds that should be remembered when you’re getting started, regardless of your age. After the recent market meltdown, the leveraged and inverse ETFs have been hogging the headlines. Broadly diversified funds have gotten lost in the mess.
• ETFs sporting rock-bottom fees and tracking wide swaths of the market are better tools for most investors, and can help build a broadly diversified portfolio. For many individual investors, depending on your goals, it may be all you need.
• A core portfolio will create a diverse mix of asset classes, spreading risk out and slowly building wealth over time. This strong mix will get investors through both a bear and a bull market as well.
• Investors who want to take a more hands-on approach should have a strategy for getting in and out of positions. Buy-and-hold is a strategy that has burned many investors recently; the time to take charge is now. By creating specific entry and exit points, you give yourself a chance to take a position in time for a potential long-term uptrend, while limiting your losses on the downside.

Among the many broad-based ETFs:

• SPDR (SPY): up 10.2% year-to-date

• Vanguard Total Stock Market (VTI): up 12% year-to-date

• iShares MSCI EAFE Index Fund (EFA): up 12.8% year-to-date

For more stories about ETF investing, visit our ETF 101 category.

Ron Rowland for JutiaGroup lists these six ETFs that you must get to know. Rowland’s caveat is that he isn’t saying buy them right now. But know them. They’re among the largest and most liquid ones on the market today:

• SPDR S&P 500 (SPY): up 12.6% year-to-date; gives instant access to the S&P 500, an index of the 500 largest domestic stocks covering all industry sectors. This ETF was the first ETF, introduced in 1993, and is referred to as the “grandfather” of funds.

• PowerShares QQQ (QQQQ): up 34.8% year-to-date; viewed as a large-cap technology benchamark, this ETF tracks the Nasdaq 100 is a sub-set of the Composite, consisting of the 100 largest non-financial stocks in the index. Exposure to real estate, banks and insurance companies is not available in this fund.

• Diamonds Trust Series 1 (DIA): up 7.6% year-to-date; a 30-stock index that tracks Dow Jones Industrial Average, an index of the largest U.S. blue chip stocks. DIA excludes some key sectors like transportation and utilities. Despite criticisms of the Dow (it’s too narrow, it excludes certain key sectors), it does give access to mega-caps.

• iShares Russell 2000 Index (IWM): up 17% year-to-date; the Russell 2000 is an index of the 2,000 smallest companies ranked by U.S. market value. Small-caps often lead the way in a recovery, too. IWM can be a good way to hold hundreds of these small companies in one fund.

• iShares MSCI EAFE Index (EFA): up 15.2% year-to-date; An international fund based upon the Europe, Australasia and Far East Index published by Morgan Stanley Capital International. It includes Western Europe, Australia, Japan — the countries with modern stock markets and banking systems. The countries in the index can change as new ones are promoted to developed status.

• iShares MSCI Emerging Markets Index (EEM): up 45.7% year-to-date; markets like Brazil, Russia, India and China are represnted in this fund, along with markets that have recently made ties with the rest of the world. It can be challenging to buy stocks in emerging markets. This ETF, like so many others, simplifies the whole process.

If these or any other ETFs are appealing to you and right for your portfolio, watch the trend lines to spot any opportunities to get in. Be sure to have a sell point before you buy, too.

For more stories about ETFs, visit our ETF 101 category.

For full disclosure, Tom Lydon’s clients own shares of EEM, QQQQ and SPY.

ETF investing has become a popular way of getting into the market with less risk than a single stock, especially when times are still uncertain. Fear not – there are ways for skeptics to invest with a “recession-proof,” or defensive, strategy by looking at certain industries.

The Motley Fool suggests that a global approach can be a wise approach, since two-thirds of the global market cap resides outside the United States. Foreign companies and markets are still affected by the U.S. economy, however, the diversification a global investment brings can buffer the losses.

• iShares MSCI EAFE (EFA): up 15.9% year-to-date

EFA has more than 2,000 holdings, and companies span the globe, ensuring maximum diversification.

Another place investors may turn to for a defensive approach is dividend-paying stocks. The following fund offers about 100 dividend-paying companies. Some are in defensive industries, such as consumer staples, pharmaceuticals and utilities, although some are also in the beleaguered financial sector.

• iShares Dow Jones Select Dividend Index (DVY): down 2.9% year-to-date; yields 5.5%

Consumer staples can also be an option. While consumers might delay buying a new television or upgrading that clunky, slow computer, few consumers would put off buying toothpaste, toilet paper and certain basic foods. Consumer staples ETFs can be an appealing option for investors who want to capitalize on this notion.

• Consumer Staples Select Sector SPDR (XLP): up 2.7% year-to-date

Remember that having a strategy, no matter the market condition, is necessary. We follow the 200-day moving average. By watching market trends and following through with your strategy in place, losses will be kept to a minimum and emotions will be left out of the equation.

For more stories about dividend and global ETFs, visit our dividend and global ETF categories.