As the markets become more volatile, investors are realizing they need to protect themselves in the future instead of riding out the bumps for the long haul. After suffering losses upwards of 50% in their retirement accounts in the recession, how willing are investors going to be to ride out the dips in the future? (Why buy-and-hold is dead).

If you are going back into the market, Jeffrey R. Kosnett for Kipinger has outlined several ways in which your money is never going to be the same again. Here are three:

1. Less Risk. A typical aggressive portfolio used to allocate about 80% to equities. The “new normal” might see an aggressive portfolio holding closer to 60%-70% in stocks. And someone who accepts only moderate risks may be comfortable with 40% or 50%. It’s going to take time for some investors to become comfortable with big bets again.
2. More Volatility. We could continue to see swings in the market, especially as we’re still a nation fearful of negative news about the economy. Cope by having a strategy and looking at the big picture. Don’t panic and sell, but wait until you’ve hit your stop loss points.
3. More Diversification. There will be more variety in the  markets. Some of these new options might be considered highly risky, but they’ll be uncorrelated to ordinary assets. Areas such as currencies, commodities, real estate and energy will be more accessible to retail investors. (How to trade ETFs).

Our last point: investors will recognize the importance of a strategy. We use the 200-day moving average, which has set entry and exit points. You can read more about trend following here.

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

One of the questions it comes down to is whether you prefer active or passive management. The differences between mutual funds and ETFs still exist when considering funds that cover the commodities space. (Why mutual funds want in on ETFs).

Overall, passive ETFs cost less than active mutual funds, on average. ETFs also trade all day on an exchange like a stock; mutual funds trade just once. (What will it take for ETFs to overtake mutual funds?)

Don Dion for TheStreet outlines a few of the differences:

Equities-based funds: These ETFs and mutual funds track the stocks of commodity producers. Rather than tracking the physical commodities themselves, these funds track companies that are involved in the commodities business. Basically, with an ETF the fees are lower, there’s freedom of intraday trading and the ease of knowing the holdings at all times. While some ETFs and mutual funds may share the same components, they differ in fees, size and track record.

Futures-based funds: ETFs and mutual funds that hold futures are a more pure play on commodities than their equity-based brethren. They also provide investors exposure to the prices of energy, livestock, agricultural and metals futures. The limitations imposed by the Commodity Futures Trading Commission (CFTC) is expected to set limits on the number of futures contracts that both mutual funds and ETFs can hold. Major changes in these funds could potentially result in higher fees, which are ultimately passed down to shareholders.

The cost-effective structure of ETFs has helped to make these products affordable competitors in the commodity space. Also, ETFs have given traders more adaptability because of their liquidity and tradability.

For more stories about mutual funds, visit our mutual fund category.

According to tax code, gold, silver and precious metals receive special treatment – the IRS views them as “collectibles” rather than capital assets. They don’t qualify for the maximum 15% tax rate on long-term capital gains. (Will the gold rally last?)

Bob Carlson for Barron’s reports that gains on the sale of gold and silver investments, including gold- and silver-backed ETFs, and gold bullion and coins (except certain U.S.-issued coins), are taxed at a maximum rate of 28% when such investments have been held for more than a year. When they are held for less than one year, gains are taxed as regular income.(Other metals to play besides gold and silver.)

Here are some other facts about precious metals ETFs that Carlson notes:

• Precious metals ETFs are organized as grantor trusts. Investors in an ETF are treated as owning undivided interests in the metal owned by the fund. When an investor sells shares in the ETF, the tax code treats that investor as having sold a share of the metal backing the fund. Thus, the investor is subject to the maximum tax on collectibles.
• If the ETF sells some of its gold or silver, as funds typically do to pay expenses, including management fees, then gains or losses on such sales flow through to the fund’s investors, though they receive no cash distribution.
• Investors aren’t allowed to own collectibles in Individual Retirement Arrangements, or IRAs, and other self-directed retirement accounts, including 401(k) plans. When gold and silver are purchased for such accounts, an amount equal to the cost of acquiring the collectible is treated as a distribution to the owner. Rather, it is included in gross income and taxed at ordinary rates, although an additional 10% penalty might apply if the owner is under age 59½.
• Evidently, these rules do not apply when gold or silver is bought for a retirement account through an ETF. Retirement accounts are treated as having purchased fund shares, not the collectibles held by a fund. It is not treated as a distribution to the owner.

Note that we’re not tax professionals, and you should call your tax consultant for specific advice.

For more stories about precious metals, visit our precious metals category. To get prepared for April 15, visit our tax category.

Holdings: The largest holdings include Gazprom, 18.1%; Lukoil Oil Company, 9.6%; Rosnett, 5.8%; and Sherbank Rossii, 5.2%.

Objective

The fund tracks the S&P European Emerging BMI Capped Index (STBMEECQ).

What You Should Know

• The top sector allocations in the fund are energy, 45.4%; financials, 22.9%; materials, 11.5% and telecommunications, 8.9%.
• The top countries in the fund are Russia, 65.2%; Turkey, 13.4%; Poland, 11.5%; Hungary, 5.3%; and the Czech Republic, 4.1%.
• The expense ratio is 0.59%.

The Latest News

• According to the World Bank, the post-crisis environment in Russia provided the necessary catalyst for reforms when it comes to the country’s structural constraints and weak domestic demand, writes Gleb Bryanski for Reuters. Without reforms, the World Bank believes Russia’s growth will remain sluggish. (Ways to play Russia’s recovery).
• The Turkish economy was constrained by exports and investments, which dropped 8.5% and 17.6% respectively, as well as a 5.3% decline in private consumption. The banking sector is well-capitalized but loan growth is decelerating, which could slow the recovery of private consumption and investment. High requirements for public sector borrowing may further limit credit for the private sector.
• The effects of the global economic crisis could be felt in Eastern Europe for some time, says one official from the European Bank for Reconstruction and Development (EBRD).
• The official notes that recovery may move faster in some areas than others; in Slovakia and the Czech Republic, improvements may be seen sooner rather than later.

For more stories about Eastern European economies, visit our Eastern Europe category.

An ETF is a basket of securities that represents a specific sector, region or specific index. ETFs are like mutual funds in that respect, but ETFs trade throughout the day like a stock. They are priced and traded continually, and they provide transparency, liquidity, and cost efficiency. (How Wall Street is using ETFs to lure back investors).

According to Mark Kennedy, there are five reasons to consider buying ETFs instead of mutual funds:

• Tax benefits. ETFs only incur capital gains taxes when they are sold. Mutual funds, on the other hand, incur capital gain taxes as shares within the fund are traded through the duration of the investment, even when you still own it.
• Ease. Buying and selling ETFs is done with a single transaction at the stated price. Mutual funds, however, have shares that are constantly being traded to reach a target price and target performance.
• Cost efficiency. Many mutual funds are actively traded and actively managed, thus leading to higher management fees. Most ETFs are passive, meaning there’s no manager for you to pay.
• Variety. The ETF industry is inundating investors with more and more trading themes. Investors are better able to track the performance of an index or achieve a financial goal with an ETF.
• Transferable. When switching managed portfolios to a different firm, some fund positions have to close out before a transfer takes place. Liquidation of mutual funds could increase risk, increase commissions and fees and incur capital gains taxes. But ETFs can be transferred without complications when switching investment firms – ETFs are considered a portable investment.

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.

As you near retirement, bonds become more and more central to your portfolio. They’re hardly “sexy” investments, but they’re incredibly useful and they provide stability and lower risk. (Reasons you should consider bond ETFs.)  But where do you go to find out what bond funds are yielding and what dividends have been paid?

As an example, look at the Vanguard Total Bond Market (NYSEArca: BND). What is it yielding? On any of the sites below, you can find information on yield, dividends and more.

• You can find this information on the quote page of ETF Trends.

• If you go to an information page such as moneyusatoday and type in BND in the quote  box, you’ll find an entire section dedicated to the dividends paid by the ETF, labeled dividends.

• Dividends on Yahoo! Finance can be found by clicking on “historical prices” for any fund. (Bonds are the foundation to a solid ETF portfolio).

Recent numbers supplied by the National Stock Exchange show that the number of U.S.-listed ETFs has jumped 11% from 716 in October 2008 to 796 in October 2009. Part of this rapid growth comes from the launch of a number of niche or specialty ETFs, which track narrow corners of the market. (How to choose ETFs).

If one is trying to make the case that there’s a glut of products for which there’s no demand, it’s tough to find supporting evidence. Investor interest is keeping pace with the launches and filings that providers are serving up,  reports Don Dion for TheStreet. Assets shot up to $707.4 billion in October 2009, a 44% jump from a year earlier.

Of those assets, more than $268 billion is invested in the top 10 largest ETFs, which includes broad index funds, emerging market ETFs and commodity funds.

Having a wide variety of ETFs available not only gives investors more options from which to choose, but they also help foster healthy competition within the industry that ultimately improves the ETF investing experience for everyone. (Wondering what an ETF is and how to invest in them?)

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

The spike in investor interest in funds like United States Natural Gas (NYSEArca: UNG), PowerShares DB Commodity Index Fund (NYSEArca: DBC), PowerShares DB Agriculture Fund (NYSEArca: DBA) has resulted in creation halts and strategy reconstruction as the Commodity Futures Trading Commision (CFTC) scrutinizes the industry, writes Don Dion for TheStreet. (More on the CFTC’s commodity limits).

The iPath Dow Jones AIG Platinum TR Sub Index (NYSEArca: PGM) recently had to halt creation in order to remain within position limits. (Regulation hits platinum ETN). And most recently, PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP) had to rush to get  approval to create new shares as trading volume suddenly picked up. (Bullish dollar ETF granted new shares).

Traditional ETFs track underlying indexes, which is made possible through the share creation and redemption process. When the creation process is halted, it creates premiums to an ETF’s underlying value. The result is an environment good for shareholders but bad for investors chasing the trend.

As an investor, you should be aware of when an ETF’s share creation has been suspended and understand that if a futures-based ETF runs out of shares, this could happen. If you’re already holding such an ETF, monitor your funds to be sure that all is running smoothly. The risk of holding a fund with suspended share creation is that when normal trading resumes, losses could be incurred as the premium disappears.

For more information on ETF trading, visit our ETF 101 category.

Max Chen contributed to this article.

Carlos Sera of Financial Tales defines dollar cost averaging as when one commits to invest a certain dollar amount or percentage of salary to an investment program, usually in a mutual fund or exchange traded fund (ETF), over a consistent period of time.  A good example is a traditional 401(k) plan to which an employee allocates 5% of a monthly paycheck. Sera has several tables illustrating how DCA works. (More on retirement).

Sera likes the dollar cost averaging method because it can encourage someone to invest in the stock market, which in turn gets them on their way to higher lifetime rates of return and a higher standard of living. Another benefit is that when stocks are cheap, you’ll wind up buying more of them; when they’re expensive, you’ll buy less.

As far as whether or not it works,  it enables and encourages many individuals to start saving and building retirement plans. It also positions them to take advantage of bargains in the market. Over time, Sera says, if an investor sticks with it, DCA could produce satisfactory results.

Our own strategy is one of trend following by using the 200-day moving average to determine when you’re in the markets and when you’re out. (How to use the trend following strategy).

Whichever strategy you employ when investing, pick one and stick with it. Bouncing around from one method to the next could wind up being costly to you, and can lead to frustration as you look for a strategy that “works” before giving any of them a chance to do so. Success doesn’t happen overnight!

For more stories on trend following, visit our trend following category.

Kevin Grewal contributed to this article.

Worldwide, investors have purchased more than $2.7 trillion of new corporate bonds this year, reports Kate Haywood for The Wall Street Journal. Contrast that with $1.7 trillion in 2008, which is when the financial crisis all but brought the flow of cash to a standstill. (Why junk bonds are in demand).

Junk bond issuers have used about 75% of proceeds from sales to refinance existing debt, the highest proportion since record-keeping began in 1996. Corporate bond sales have been a boon to many companies, giving them a lifeline as they wait for banks to resume normal lending.

“Junk,” or high-yield, refers to a bond rated “BB” or lower because of a high default risk. The main reason junk bonds have had a good year is simply that investors have some risk appetite to spare again, explains Matt Krantz for USA Today. (Other types of bonds that have done well in this market).

After the terror of the March pullback and the major market meltdown leveled off this year, investors began to put their money into investment-grade and junk bonds and took a step back from the safety of government debt.

While junk bonds have higher risk, they will do fine so long as investors risk appetite is steady. If the economy doesn’t heal or if companies increasingly default on their debt, you could find yourself suffering large losses. (When is it time to exit the bond market?)

What can you do about it? Have an exit strategy when the trend turns. (Why stop losses matter).

For more stories about bond ETFs, visit our Bond category.

A sample of such ETFs:

• SPDR Barclays Capital High Yield Junk (NYSEArca:JNK): up 30.9% year-to-date

• iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG): up 24.4% year-to-date

• Vanguard Total Bond Market (NYSEArca: BND): up 3.8% year-to-date