Last week, a solid majority of fund types reported their best weekly inflows of the year while money market funds experienced large outflows, writes Joe Morris for Ignites.

EPFR Global data shows where all the money has moved: $1.62 billion went into global bond funds, $540 million found its way into emerging-market bond funds, $925 million funneled into the real estate sector, $1.74 billion flowed into global equity funds, and money funds lost $47.2 billion.

Some ETFs representing these areas include:

• SPDR Barclays International Treasury Bond Fund (NYSEArca: BWX): up 6.6% year-to-date

• PowerShares Emerging Mkts Sovereign Debt (NYSEArca: PCY): up 37.7% year-to-date

• iShares Dow Jones U.S. Home Construction (NYSEArca: ITB): up 37.2% year-to-date

• SPDR S&P World ex-US (NYSEArca: GWL): up 25.9% year-to-date

• WisdomTree U.S. Current Income Fund (NYSEArca: USY): up 2.1% year-to-date

Commodity sector funds also added $1 billion last week, accumulating more than $9 billion in year-to-date inflows.

• iShares S&P GSCI Commodity Indexed Trust (NYSEArca: GSG): up 2.8% year-to-date

Investors are becoming more confident, but many still remain cautious about the market. U.S. bond funds have seen net inflows every week this year and recently saw an increase by $2.79 billion. Global bond funds have seen inflows for 23 straight weeks.

• iShares Lehman 7-10 Year Treasury Bond Fund ETF (NYSEArca: IEF): down 5.4% year-to-date

Value funds are outperforming growth funds for the first time since late August. U.S. stock funds received $340 million, mid-cap ETFs, U.S. sector funds and actively managed big-cap growth funds all raked in new money as big-cap blend ETFs saw outflows.

• Vanguard Total Stock Market (NYSEArca: VTI): up 22.8% year-to-date

• Vanguard Large-Cap ETF (NYSEArca: VV): up 20.8% year-to-date

Max Chen contributed to this article.

Bryan Keller of Seeking Alpha states the following reasons why these stocks are attractive to investors:

• They are household names, are the most recognizable stocks to the general public and information on them can be found just about anywhere

• They have very attractive valuations when compared to small-cap or mid-cap stocks

• Have stable business models and are not pressured to expand or get their hands on the next big innovation

• Many of these companies are self-funding, meaning they don’t need to issue debt or additional stock to fund the business – stability lures the average investor in

• Current crisis notwithstanding, they’ve shown a past ability to weather an economic downturn, challenged but intact

Bigger is not always necessarily better. I don’t know about you, but a super-sized value meal at McDonalds (MCD) doesn’t seem like a good thing to me, and I don’t know how many people really need that 108-inch television in their living rooms. And another thing: few have been immune from the economic downturn – and that includes large caps. Bank of America (BAC), Microsoft (MSFT), JP Morgan (JPM) and other mega companies have all taken serious hits lately.

Also be sure to know what you own when looking at large-cap ETFs, because although they’re diversified, many of them have weightings in financials, a sector many investors might be leery of for the time being.

Large caps have been beaten up as of late, though – watch the trend lines if you’re looking for opportunities. If you do want to grab some exposure to the big boys of the capitalization world, here are a few ETFs to take a look at.

• Vanguard Large-Cap ETF (VV): Follows the top 750 U.S. large-cap stocks; top holdings are Exxon Mobil (XOM), 3.7%; General Electric (GE), 2.3% and Microsoft, 2%.

• iShares S&P 500 (IVV): tracks the same index as the SPY, down 4.92% over the last month; top holdings include Exxon Mobil, 5.2%; Procter & Gamble (PG), 2.4% an General Electric, 2.2%.

• SPDRSs (SPY), holds one-tenth of its assets in mega cap stocks, down 4.99% over the last month; top holdings include Exxon Mobil, 5.1%; General Electric, 2.2%; and Johnson & Johnson (JNJ), 2.1%.

The Financial Select Sector SPDR (XLF) has fallen 2.2% after the overnight lending-rate target was cut to nearly zero on Dec. 16, reports Jeff D. Opdyke for The Wall Street Journal.

But a financial bounce back could be in the works as some managers dumped holdings for year-end reports and a few booked losses to offset capital gains in preparation for tax season.

The exorbitant profits from debt securitization is no longer possible and it is looking like emerging-market, iShares MSCI Emerging Index Fund (EEM), countries such as India, China and Korea (ICK countries) are showing the best earnings growth.

The current bear market has lasted well beyond the point with which common sense dictates, writes Steven T. Goldberg for Kiplinger.

Goldberg speculates that the current bond market, iShares iBoxx $ Invest Grade Corp Bond (LQD), could experience returns of 30% or 40% in the future. Goldberg suggests that investors keep a hefty percentage of their stock money in large-cap,  Vanguard Large Cap ETF (VV) or iShares Morningstar Large Core Index (JKD), high-quality companies.

As you shop around, take a moment and pause to ponder over these ETFs and maybe a few others when compiling an effective portfolio for 2009.

But no matter what the experts predict, predictions have a funny way of being wrong a lot of the time. While it’s fun to guess, be sure to stick to your strategy and enter only when these areas move above their 50-day or 200-day moving averages.

Traditionally more defensive in nature compared to small and mid-sized company equities, large-cap ETFs have shaved some of their former bulk with ETFs such as:

• iShares Morningstar Large Core Index (JKD): down 34% year-to-date

• Vanguard Large Cap ETF (VV): down 39.3% year-to-date

The results of these two ETFs and others correspond with large-blend mutual funds, tracked by Morningstar, which are down on average by 41%, reports Billy Fisher for The Street. The main benefits for ETFs, though, are their lower taxes and access to a diverse set of asset classes.

Current market conditions are believed to be ripe because large-caps are in favor with conditions with great net creditors instead of net debtors. Small-caps may have a little more risk, as they’re not as established as large-caps, but as times change, smaller companies can bend and flex a little better because they don’t have all the bureaucracy that a large-cap might.

If these statements prove true, watch those large-caps to see if and when they touch on their short- and long-term trend lines. Only then will they be worth considering whether they work in your portfolio.

Large-caps are the most common and popular investing asset class, and they are easy to compare because their make-up is similar.

Will McClatchy for ETF Zone gives us an in-depth look at the different large-cap ETFs on the market, to help you decide which fund works best for your goals.

• SPDRs (SPY): Holds one-tenth of all ETF assets above $70 million; pays quarterly; down 10.6% year-to-date.
• iShares S&P 500 (IVV): tracks the same index as SPY, yet charges 0.1% less than SPY; pays bi-annually; down 10.6% year-to-date.

In terms of returns, SPY and IVV are pretty much right in line with one another. McClatchy also notes that SPY may be one of those ETFs with innovative managers who are making index changes efficiently. Smaller spreads may be executed behind the scenes by the specialists.

Large-cap firms are more likely to be mixing in with foreign currencies due to the breadth of their market cap. There is the added attribute of hedging the U.S. dollar, if that is a plus for you. Other large-caps ETFs available:

• Vanguard Large-Cap ETF (VV): follows top 750 U.S. large-cap stocks; expense ratio 0.7%; down 10.1% year-to-date.
• SPDR Dow Jones Wilshire Large-Cap (ELR): 0.20% expense ratio; follows top 750 U.S. large-caps stocks; down 11.2% year-to-date.
• SPA Market Grader Large Cap 100 (SZG): Has a basket of 100 stocks, with an expense ratio of 0.85%; down 15.1% year-to-date.
• Rydex Russell Top 50 (XLG): Has a basket of 50 stocks and an expense ratio of 0.20%; down 12.2% year-to-date.

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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