The day has come that we can celebrate our freedom  with our friends and family, and drink a celebratory beer while watching the fireworks. But make sure your beer was made with pride in the beautiful United States.

A topic of much recent debate, “Buy American” sounds patriotic, but it entails risk. The globalization of  markets is also part of the concern, as many of the materials and products we use to “Buy American” are actually made in China.

As stated in an editorial from The New York Times, the Democrats in Congress could not resist adding a “Buy American” provision to the fiscal stimulus bill earlier this year. It might seem sensible to ensure that taxpayer dollars would be used exclusively to support American jobs. This is creating conflict with American allies, and this movement could cost the United States.

Foreign and domestic companies that employ hundreds of workers in this country cannot bid for government projects because they cannot guarantee the American roots of all the steel, iron and manufactured goods in their supply chain, as the provision requires. Are there alternatives made in America that can replace foreign counterparts?

On the flip side, a consistent effort to buy food products farmed inside the United States, for example, would not only cut down on the environmental costs of shipping food into the country, but also could nurture a much stronger local agricultural industry in the long-term, reports Winnipeg Free Press.

Well, even if your jeans do not have a “Made in the U.S.A.” tag, you can still continue your loyal patriotism in other ways. The battle will continue over “Buy American” and the goal is the same, to keep American growing and flourishing.

ETFs that hold U.S. companies:

• iShares US Total Market Fund (IYY): up 15.3% over three months

• iShares S&P 100 Index Fund (OEF): up 13.1% over three months

• DIAMONDS Trust Series 1 (DIA): up 10.5% over three months

Have a Happy and Safe 4th of July!!

Some of the dividend-focused ETFs are so diversified that they could stand in as core holdings for a portfolio, remarks Paul Justice for Morningstar. When considering a dividend paying stock or ETF, the objective is to think growth over the long-term. Dividend investing is all about finding solid dividend stocks that are reasonably priced and are expected to continue raising their dividends in the future, explains Dividends4Life on iStock Analyst.

Do not confuse dividend investing with searching for high-yielding stocks to generate a high income. A majority of the time, the quality ones will not have outrageous yields, however the growing dividends over time could compensate.

Here is a small sample of dividend-paying ETFs. Note that this is not all-inclusive, and there are may other worthy ETFs delivering dividends to choose from:

• Vanguard Financials (VFH): yields 5.9%; down 5.2% year-to-date
• PowerShares International Dividend Achievers (PID): yields 6.2%; up 3.4% year-to-date
• SPDR S&P Dividend ETF (SDY): yields 6.4%; down 1.1% year-to-date
• SPDRS (SPY): yields 3.3%; up 1.4% year-to-date
• WisdomTree LargeCap Dividend (DLN): yields 4.8%; down 4.5% year-to-date
• Industrial Select Sector SPDR (XLI): yields 4%; down 2.3% year-to-date
• Diamonds Trust, Series 1 (DIA): yields 3.9%; up 2.8% year-to-date
• iShares S&P 100 (OEF): yields 3.7%; down 0.9% year-to-date
• iShares NYSE 100 (NY): yields 3.8%; down 2.9% year-to-date
• Rydex Russell Top 50 (XLG): yields 3.6%; down 1.6% year-to-date

Looking at the past three months and the last year, active stock ETFs by PowerShares are performing by as much as 5% better than their passive counterparts, writes Murray Coleman for IndexUniverse. PowerShares’ “active” ETFs provide a level of freedom to trade and don’t track a benchmark. It should be noted that these actively managed ETFs do have higher expense ratios compared to passive ETFs, but they’re still less expensive than mutual funds.

The four PowerShares active ETFs in the markets include:

• PowerShares Active Mega Cap Fund (PMA), which is comprised of the best performing large-cap stocks last year, has outperformed its passive competitors, iShares S&P 100 Index (OEF) and the Vanguard Mega Cap 300 Index (MGC),  by 3.5-5% in the last three months. PMA includes around 30 mega-cap stocks, which tries to outperform the Russel Top 200 index, and so far fared better than the Russell by 5% for the year. Compared to MGC, PMA has more exposure to energy (21.7%), health care (25.2%), and technology (31.8%), but it has less exposure in consumer staples (6.6%), financials (6.8%), and industrials (1.8%).

• PowerShares Active Alpha Multi-Cap Portfolio (PQZ) may take up a range of different stocks. It has done 3% better compared to the average multi-cap core mutual fund and the Lipper multi-cap index. Compared to its closest competitor, Vanguard Total Stock Market ETF (VTI), it has more sector allocations in technology (40%) and materials (15.7%), but it is lighter in consumer discretionary (1.9%), consumer staples (3.4%), health care (9.7%), industrials (3.8%) and no exposure to utilities.

• PowerShares Active AlphaQ Fund (PQY) is made of 50 top-ranked names from the Nasdaq composite benchmark. Its passive rival, the PowerShares QQQ (QQQQ), seems to be doing a little bit better. PQY differs in the fact that it holds around 6.5% in financials. It now holds 49.8% in technology and lately it is has been holding more in software companies. Furthermore, PQY has no allocations in energy.

• PowerShares Active Real Estate Fund (PSR) focuses on real estate investment trusts with most investments in REITs. It has beaten broad-based index tracking funds, like the Vanguard REIT Index ETF (VNQ). Managers of PSR may select stocks of non-REITs with large real estate holdings that don’t distribute earnings and they are given the option to temporarily invest in cash under market distress.

Max Chen contributed to this article.

That’s according to Neil Michael, head of quantitative strategies for SPA ETFs. “I suspect that they will outperform small- and possibly mid-caps, as well.”

Growth in the United States 2008-2009 is going to be below-trend. The tendency for large-cap ETFs to have greater international exposure will work in their favor, Michael says.

Over the last six months, mid- and small-caps have been outperforming the large in all three of the blend, growth and value categories. Large caps, in turn, are down 8.6% for value, 4.9% for blend and 1.4% for growth.

But thanks to slower growth, large-caps are in a position to deliver numbers, says Michael. “Large caps will benefit because the dollar is the weakest they’ve been in decades. That’s a massive competitive boost to U.S. equities and multinational companies, which tend to be large caps.”

Even if the dollar did improve overnight, the effects wouldn’t be seen for a couple years as far as large-caps are concerned, he says.

In 2005, Michael points out, the GDP deficit was 6%. The number has slowly improved to 4%, and companies are benefiting – particularly the large caps.

“If you look at the top 25 stocks by market cap, more than 40% of their sales come from overseas. The dollar is cheap, and emerging markets are continuing to grow very rapidly.”

On their own merits, they look good, but when large-caps are compared with bonds, they look even more attractive. “Dividend yield on the S&P is at reasonably historic highs and bond yield is historically low. The S&P looks attractive relative to bonds,” says Michael.

Michael acknowledges that so far, small-caps have been outperforming at historic extremes. “But if you look on a long-term basis relative to large-cap, the gap starts to close. It’s what we’ve started to see in the last six months to a year.”

He believes this gap is only going to continue to close further.

The size of the large caps, coupled with their high visibility in the marketplace, are going to continue to draw investors toward them as the markets remain volatile.

“People are looking for visibility and stability, and you tend to get that more from large-caps than small-caps,” he points out.

SPA MarketGraders listed in the United States in October of last year. Their funds are constructed by a quant model.

• SPA ETF Market Grader Large Cap (SZG), down 13% year-to-date
• iShares S&P 100 Index Fund (OEF), down 14.4% year-to-date
• SPDR S&P 500 ETF (SPY), down 13.4% year-to-date
• Vanguard Large cap ETF (VV), down 12.5% year-to-date
• PowerShares QQQ (QQQQ), down 12.9% year-to-date

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