ETFs are a good way for investors to capitalize on policy initiatives of the Obama administration while reducing the day-to-day volatility compared to other investment options, such as stocks, remarks Daniel Harrison for IndexUniverse. (Play Obama’s new energy plan).

Health Care opportunities. Jim Oberweis, chief executive of Oberweis Asset Management, believes that “there is a possible positive [outcome] for pharmaceutical companies” since sales of prescription drugs will increase as health care coverage widens. Furthermore, Oberweis argues that health care providers may benefit from more patient visits and biotechs are in a more positive position than previously thought. (More on the health care sector).

Broad-based and niche market ETFs that could benefit from the growth in the number of patients receiving coverage include:

• Health Care Select Sector SPDR (NYSEArca: XLV): up 14.3% year-to-date
• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 15.1% year-to-date
• iShares Dow Jones U.S. Medical Devices (NYSEArca: IHI): up 32.4% year-to-date; IHI is well-diversified, with 58% of assets under management in its top 10 holdings, and a maximum single-stock weighting of 10%. Companies included should benefit from the increase in the number of hospital patient visits.
• PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 10.3% year-to-date; PJP is a well-diversified ETF on large, mostly dividend-paying pharmaceutical companies that have lots of cash on hand and may see an increase in sales of core prescription drugs.
• SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 19.2% year-to-date; XPH is more broadly diversified.
• iShares Dow Jones US Pharmaceuticals (NYSEArca: IHE): up 22.2% year-to-date; IHE focuses more on the oversold traditional pharma brands like PJP.
• SPDR S&P Biotech (NYSEArca: XBI): down 4.3% year-to-date; XBI is well-diversified, with 45% of its funds invested in its top 10 holdings. The fund is also mostly invested in nontraditional pharma companies.
• iShares Nasdaq Biotechnology (NasdaqGM: IBB): up 11.2% year-to-date; IBB has a higher weighting in its top holdings and it focuses exclusively on Nasdaq-listed securities; some large biotech companies may be excluded.

Clean energy. It is no big secret that clean energy is a big policy initiative of the Obama administration. The more notable technologies being pushed into the forefront of the sector are nuclear and solar energy. Solar tech investing is still considered risky because of the industry’s mini boom/bust cycles, but ETFs help minimize volatility. (More on alternative energy).

• Market Vectors Solar Energy ETF (NYSEArca: KWT): down 6.5% year-to-date
• Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 0.3% year-to-date
• Market Vectors Nuclear Energy ETF (NYSEArca: NLR): up 19.7% year-to-date

Max Chen contributed to this article.

According to Don Dion for The Globe and Mail, he’s chosen his top five ETFs based on the fact that he feels they capture their theme, provide liquidity and exploit the advantages of the ETF model. This is by no means a conclusive list – there are many, many worthy ETFs out there.

These five ETFs address important themes in the financial world of today:

Biotech. iShares Nasdaq Biotechnology (NasdaqGM: IBB) is up 11% year-to-date. Biotechs include many start-up companies that burn out, but a lucky few do strike it rich. Instead of shifting through all the possible companies, the ETF offers a great way to pick up the sector.

TIPs. iShares Barclays TIPS Bond (NYSEArca: TIP) is up 7.1% year-to-date. This fund tracks securities that range in duration from one to 20 years. Indiividual TIPs bonds are taxed on inflation adjustment and TIP distributes inflation-adjustment as income.

India. WisdomTree India Earnings (NYSEArca: EPI) is up 85.8% year-to-date. The fund offers access to the Indian equity market while allowing for the limitations that foreigners might have on investing. Potential investors should note that emerging market equities tend to be more volatile.

Gold. SPDR Gold Shares (NYSEArca: GLD) is up 15.4% year-to-date. Gold has been the talk of the markets these days. Buying gold is a good way to diversify a portfolio. GLD tracks the price of gold stockpiles, so investors won’t be tracking the price through derivative holdings.

S&P 500. SPDRs S&P 500 (NYSEArca: SPY) is up 16.7% year-to-date. The fund has been providing low-cost exposure to the S&P 500. SPY is a good proxy for the market as a whole and Dion believes it to be a must-have fund for any well-rounded ETF portfolio.

Max Chen contributed to this article.

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

July was kind to the biotech sector. The NYSE Biotechnology Sector rose up 24%, which dwarfed the 6% for the S&P 500. Sam Subramanian for iStockAnalyst reports that a host of favorable clinical trial results were the biggest drivers, with a large buyout announcement an even bigger ray of light.

The largest biotech-pharma merger was the Roche-Genetech deal. Meanwhile the Medarax takeover sent shares up 90% after the announcement was made.

Is it too late to jump in?

Subramanian says that there are some factors favoring biotech companies right now:

• An aging population
• Rising cancer rates
• Rising degenerative disease rates
• An increasing understanding that biotechnology offers some of the best solutions for disease management
• The potential for more “blockbuster drugs” is in place
• Biotech companies are looking to expand the uses of some drugs to treat more than just one disease
• Biotech drugs are, to a degree, safe from generic competition

If you do decide that biotech is an area you’d like exposure to, mind the trend lines and have a strategy to protect yourself.

• PowerShares Dynamic Biotech & Genome (PBE): up 18.4% year-to-date

• iShares NASDAQ Biotechnology (IBB) up 10% year-to-date

For more stories about biotech, visit our biotechnology category.

Challenge Grants are two years grants to National Institute of Health (NIH) designed to bring about collaborations between  small pharmaceutical and biotechnology companies and academia. This funding could bring about additional innovation in the industry and keep it growing.

Ruben Dagda for The Examiner reports that the biotechnology industry has proven as a safe and foolhardy industry even in these rough economic times. Both the health care and biotechnology industries have been among the least hard-hit in terms of job losses and contraction, although it’s far from recession-proof.

Early signs of funding within the industry are coming back and the biotech industry needs the funding because of the nature of the industry. Thomas Gryta for The Wall Street Journal reports the sector has a higher need for that cash than other industries because its drug-development model often requires years of losses before a product is approved. The tight credit markets have left the bioetch companies in a vulnerable position, and the stimulus package has the ability to preserve them.

• iShares NASDAQ Biotechnology (IBB): down 2.5% year-to-date; up 8.2% over three months

• SPDR S&P Biotech (XBI): down 11.2% year-to-date; up 5.5% over three months

• PowerShares Dynamic Biotech & Genome (PBE): down 3.4% year-to-date; up 6.3% over three months

• First Trust AMEX Biotechnology (FBT): down 0.30% year-to-date; up 6.5% over three months

For more stories about biotech, visit our biotechnology category.

Do buy-and-hold investors who seek exposure to emerging markets have to just stomach the wild, volatile ride and stick to a 5% allocation in these regions?, asks Gary Gordon for ETF Expert.

There may be a middle ground for those faced with this decision. If an investor wants stronger exposure to these regions with a better upside potential, Gordon suggests that the best bet is to offset that risk with low-correlating and non-correlating investments.

It is up to you to do the research to see what ETF you’re holding, in order to ensure low correlations. Here are five ETFs that can help ease up emerging market fund risk, against iShares MSCI Emerging Market Index (EEM):

• iShares Aggregate Bond Fund (AGG): down 0.3% year-to-date; 0.40% correlation
• PowerShares VRDO Tax-Free Weekly (PVI): up 0.7% year-to-date; 0.05% correlation
• iShares NASDAQ Biotechnology (IBB): up 1.8% year-to-date; 0.68% correlation
• iShares Barclays MBS Bond (MBB): up 1.8% year-to-date; -0.32% correlation
• SPDR Gold Shares (GLD): up 6.8% year-to-date; 0.71% correlation

For more stories about emerging markets, visit our emerging markets cateogry.

The Obama administration claims that biologic drugs should be subject to generic competition after seven years, citing the potential for reducing health care costs, Catherine Larkin for Bloomberg. Currently, biologics can’t be copied even if patents have expired because biologics makers say the medicines can’t be replicated like conventional pills can.

U.S. citizens spend more than $60 billion a year on biologic drugs to treat serious illnesses at on average $200,000 for each medicine. Drug makers maintain that the high costs are what allow for cycles in innovative research and development, whereas the Office of Health Reform thinks drug exclusivity will diminish innovation and reduce affordability.

According to the Federal Trade Commission, generic biologics could be sold at 10% to 30% discounts without taking market share away from brand-name companies.

Investing in the biotech sector requires more due diligence than any other sector because of its unpredictable nature and the potential fallout of overly hyped products, remarks Marc Lichtenfeld with the Smart Profits Report. If you are looking into this sector, you may want to be sure that the potential for profits is worth the risks.

• PowerShares Dynamic Biotech & Genome (PBE): up 1% year-to-date

• iShares Nasdaq Biotechnology (IBB): up 1.6% year-to-date

For more information on the biotech sector, visit our biotechnology category.

Max Chen contributed to this report.

Owning individual biotechnology companies can be a challenging way to invest in the sector, as many of the current companies so not have enough money to stay in business past 2010. Also, any bad news regarding a company’s clinical trials can quickly put shareholders in the red, says Ron Rowland for Invest With An Edge.

Given those challenges, a biotech ETF can help spread the risk in the sector around some. It’s a challenge to pick one or two winning stocks within a sector, especially one such as biotech. While the industry was profitable in 2008, there is expected to be some consolidation. A recent Ernst & Young report revealed that 20% to 25% of firms have less than one year’s worth of capital left; others suspect this figure could be as high as 50%.

The sector has potential, though, and 27 different states are currently in a battle to entice biotech companies to their cities. And the recent repeal of the ban on federally funded stem cell research could lead to major innovations within the sector. Scientists are also scrambling to find a wheat plant resistant to the Ug99 fungus, which threatens to wipe out 80% of the world’s wheat crop.

As of now there are six biotech ETFs to choose from. They differ from each other by holdings and by weightings, so it is important for each investor to look under the hood of each ETF. Expense ratios may vary as well, as this also eats into returns, so consider these factors before going in.

• iShares Nasdaq Biotechnology Trust (IBB): down 3.5% year-to-date

Other biotechnology-focused ETFs include:

• HOLDRs Biotech (BBH): up 2.4% year-to-date
• SPDR S&P Biotech (XBI): down 10.9% year-to-date
• First Trust Amex Biotech Trust (FBT): up 0.9% year-to-date
• PowerShares Dynamic Biotech & Genome Portfolio (PBE): down 4.8% year-to-date
• PowerShares Global Biotech Portfolio (PBTQ): down 2.7% year-to-date

For more stories on biotechnology, visit our biotechnology category.

President Barack Obama today met with the American Medical Association about his proposal for government-run health care, which would cut costs and heighten competition, reports Judy Keen for USA Today. But the AMA doesn’t support the plan and fears it could make the health care situation in this country even worse.

Obama’s plan calls for a health insurance exchange in which private plans compete with a public option. It would ideally drive down costs while expanding choices. The AMA says that if private insurers can’t compete with a government-run plan, there would be an explosion of costs that would have to be absorbed by taxpayers.

• PowerShares Dynamic Healthcare (PTH): down 4.7% year-to-date

Meanwhile, changes are afoot in the biotechnology industry, as well. The sector has been able to turn a profit only once over the past four decades. So why are 27 different states paying as much as $100,000 each to entice companies onto the exhibition floor of a biotech convention?

The biotechnology industry is the so-called grail of economic development, and cities are betting taxpayer money on research parks and wet laboratories. Shaila Dewan for The New York Times reports that there are two problems with the race for biotech in these cities:

1. The industry is highly concentrated in established epicenters like Boston, San Diego and San Francisco, which offer not just scientific talent but also executives who know how to steer drugs through the long approval process. Getting that top talent to move to other cities might be a challenge.
2. Biotech is a small industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people.

Nevertheless, biotech stocks and ETF continue to enjoy the rally, with shares of Human Genome Science (HGSI) rocketing 20%, and the Amex Pharmaceutical Index up 2%. Late Wednesday, a Food and Drug Administration advisory panel recommended that two leading psychiatric medications – AstraZeneca’s Seroquel and Eli Lilly’s Zyprexa – be approved for use in teenagers and certain children suffering from bipolar disorder or schizophrenia, reports Val Brickates Kennedy for The Wall Street Journal.

A few biotech-realetd ETFs:

• PowerShares Dynamic Biotech & Genome Portfolio (PBE): down 0.4% year-to-date

• SPDR S&P Biotech (XBI): down 8.5% year-to-date

• iShares Nasdaq Bioetch ETF (IBB): down 0.9% year-to-date

For more stories on biotechnology, visist our biotechnology category.

Ernst & Young posted their annual report, which stated that the recession could force companies to consolidate as sources of public funding are diminishing even though the industry was profitable in 2008, reports Rick Mullin for C&EN. The report shows that 20% to 25% of public biotech firms have less than a year’s worth of capital left. Others think the number has risen to as high as 50%.

Revenue of publicly traded biotech companies grew 12% to $90 billion in 2008, and the global industry’s net loss dropped to $1.4 from $3 billion. Capital raised dropped 46% to $16 billion for U.S. and European firms in 2008. IPO funding plummeted 95% to $116 million. Venture capital funding only fell 19% from 2007’s high of $6 billion.

Many companies will need to find new sources of capital, according to the Associated Press. They will need to either develop partnerships or seek buyouts from other companies. Lack of funding would eventually halt the long and expensive process of research and testing. In the U.S., the new administration has embraced biotechs and has pledged its support for the industry.

Soon, the market will see more personalized medicines and generic drugs that could increase competition, which should put a premium on biotechs that keep up with innovative breakthroughs. The continuing globalization of the sector is also seen as a sustainable way to finance further drug developments.

iShares Nasdaq Biotechnology (IBB): down 6.9% year-to-date

HOLDRS Biotech (BBH): down 1% year-to-date

Max Chen contributed to this article.

Wall Street tends top focus on the banks and the policy makers in Washington, as they anticipate their next move. Investors have gotten creative and are searching for possibilities in sectors such as homebuilders and biopharma. Jeff Cox for CNBC reports that mergers and acquisitions could increase through the year as the government seeks to free up more capital that can be used by bigger companies and dissolve the smaller, less productive ones.

The expansion will move globally, but not to the IPO levels of before. There are great valuations out there, however. We’re going to see more global expansion and integration of companies, where the expansion tended to be more nationalized than in the past.

To make sifting through the M&A trend easier, ETFs offer a safer play and take the guesswork out of single stock picking. Choosing ETFs that cover the sectors where M&A activity will abound gives investors an opportunity to participate in the trend while reducing the risk of getting burned by individual companies that do bad deals.

Are you ready for a rebound, if this is it? Whether it is or not, there are ways to be prepared.

There are trillions of dollars sitting on the sidelines right now as investors ride out the storm, but when the bottom hits and a rebound begins, investors need to be mentally prepared and ready to go.

Most funds are far below the 200-day moving average, meaning it would be a long wait before a signal to buy is reached. We haven’t been so far below the long-term trend lines in decades. As a result, we have a short-term plan for getting back into the markets if the rebound is real:

• When a fund crosses above its 50-day moving average, put 25% of the value of your portfolio.
• When the fund goes up 5%, put another 25% in.

By the time this happens, the 200-day moving average should be well within sight.