More Costly Natural Gas and Electricity Could Burn Cash, But Help ETFs

Get ready for a spike in electricity costs - it might hurt wallets more, but it could at least benefit exchange traded funds (ETFs).

California State Assemblyman Chuck DeVore says in Red County that if you think gas is eating up your disposable income, wait until you see your electric and natural gas bills in the next year.

California receives 42% of its electricity from natural gas, and homes use the commodity for everything from cooking to heating. Prices for it has increased 45% so far in the last year, and the Wall Street Journal recently reported that costs may double again soon. Ann Davis and Russell Gold for the Wall Street Journal say that the global appetite for it is on the rise.

But as this chart courtesy of the Wall Street Journal shows, the United States is actually on the lower end of the price range:

It once was a regional commodity, often consumed where it was produced. But there have been innovations in transporting it, and the global trade is now in full force.

Coal and gas power 70% of America's grid, as well, and the price of coal has doubled. This will ultimately translate into more costly electricity.

Suddenly, reading by candlelight doesn't seem like such a bad idea.

Investors may find this as an opportunity to hedge the rising energy costs:

• United States Natural Gas (UNG), up 53.5% year-to-date
• Market Vectors Coal (KOL), up 20.3% year-to-date
• Utilties Select Sector SPDR (XLU), down 4.8% year-to-date

Talks Between Two European Utilities Might Affect Global ETF

European utilities may be on some investors minds, as the biggest power producer in Europe gets ready to offer a takeover, lighting up related exchange traded funds (ETFs). Electricite de France S.A., the biggest power producer in Europe, is offering British Energy Group Plc a contract that will be 5% below the company's share price, report Paul Dobson and Ambereen Choudhury for Bloomberg.

The proposal is expected any day now, but it's confidential. Many power producers want to buy British Energy because Prime Minister Gordon Brown backs nuclear reactors to meet energy demand and replace the aging units. The U.K. government would sell its stake in the deal.

iShares S&P Global Utilities (JXI) holds 1.9% in Electricite de France, Iberdrola is 5.9%, with E.ON AG at 10.9%, the largest holding. The fund is allocated throughout Europe, with the United Kingdom containing 10.7% and France at 10.8%.

If Investment Remains Solid, Infrastructure ETFs Could Gather Strength

An exchange traded fund (ETF) can be a better proxy for a sector than a single stock. It takes the guesswork right out of investing.

Diversification is another element that is added when using ETFs instead of a single stock within a portfolio. An example is the GE (GE) stock that missed its numbers by a long shot late last week. While media has been a weak performer so far this year - PowerShares Dynamic Media (PBS) is down 10.4% year-to-date - and the financials are tough, there could be other reasons to own GE. The company, after all, wears many hats.

How about infrastructure?, asks Roger Nusbaum for Seeking Alpha. The infrastructure sector can cover a wide range of things, including roads, airports, utilities, information technology and other channels of communication. Breakdowns in some of these areas can lead to major disruptions in a country, as seen when China experienced a record snowfall this winter.

Globally, billion upon billions will be spent on infrastructure over the next decade or two. It is reasonable to assume that stocks in this sector will do well, wait until these funds move back above their trend lines before diving in. Countries and regions such as South Africa, Latin America and China are making infrastructure improvements a particular focus in the coming years.

Build up your portfolio's inner strength with:

• iShares S&P Global Infrastructure Index (IGF), year-to-date down 10.1%
• SPDR FTSE/Macquarie Global Infrastructure 100 (GII), year-to-date down 5.8%

Utility ETFs Can Have a Home In Long-Term Portfolios

The utility sector is represented by a few exchange traded funds (ETFs), and in volatile markets, they've acted as a good hideout spot.

Over the last five years, utility ETFs such as the iShares Dow Jones U.S. Utilities Fund (IDU) or the Utilities Select Sector SPDR (XLU) have seen wonderful price appreciations of about 100%, reports Billy Fisher for The Street. In 2007, the ETFs were up 13.5% and 16.3% respectively. This year, they've faltered some: IDU is down 6.9%, while XLU is down 6.2%.

These ETFs tout dividend yields as well, between 2.5% and 3.0%. The recent market swings have proven these ETFs to be a great place to be for shelter. Will other market sectors start to trend above these ETFs in the coming quarters?

Industry insiders believe that utility stocks are overvalued right now. Many are not bullish in utilities, but say they do have a place in a long-term portfolio. Average earnings growth and stability are traits that give utility ETFs some added attraction.

Both of these utility ETFs are far below their trend lines - both the 50-day and 200-day moving averages. Hold off until they cross over, then implement your exit strategy if they head south again.

ETF Tracking Error Is Sometimes a Necessary Evil

Logically, exchange traded funds (ETFs) should have minimal tracking error. That's because they track an index, and in theory, if the index zigs, so does the ETF - and vice versa. It's not always the case, though, and tracking error does occur.

Clean Energy ETF Will Bask In Solar Power

Clean energy exchange traded funds (ETFs) may see sunny days as First Solar Inc. (FSLR) got a thumbs up for revenue increases from analysts.

Analysts raised their estimates for the solar panel maker, saying the company will continue to post revenue growth from lowered costs and manufacturing improvements, reports the Associated Press.

PowerShares WilderHill Clean Energy (PBW) holds 3.32% of First Solar. The expected revenue growths could set the ETF up for an increase. It could use the lift because it's down 21.7% year-to-date.

First Solar's stronger-than-expected fourth quarter surprised Wall Street, giving 2008 revenue forecasts a jump as well. Expectations are for sales to double this year. In the last year, First Solar's stock has risen 345%.

Utilities Investing With ETFs

Public utilities offer value, profit and reliability when the market is at its worst, and so can the exchange traded funds (ETFs) that track them.

However, Del Thiessen for Seeking Alpha cautions that they're not immune from downturns, even though they are less likely to suffer a precipitous drop when times are bad. In fact, he says, utility ETFs have several advantages over single stocks: diverse holdings, relatively low risk and they generate dividends. 

• PowerShares Dynamic Utilities (PUI), down 7% year-to-date
• iShares S&P Global Utilities (JXI), down 8.4% year-to-date
• Vanguard Utilities ETF (VPU), down 6.9% year-to-date
• Utilities Select Sector SPDR (XLU), down 6.5% year-to-date

All but PUI remain above their trend line (200-day moving average).

While the sector, overall, has suffered losses along with nearly everyone else in recent weeks, The Wall Street Journal gathered data for sector losses between Oct. 9, 2007 and Jan. 23, 2008. The numbers showed that utilities suffered the fewest losses in the declining market:

Chart courtesy of the Wall Street Journal.

South Africa's Blackouts Dim ETF

The blackouts in South Africa might be good for the price of gold, platinum and diamonds, but it's wreaking havoc across other sectors and in the country's exchange traded fund (ETF).

Since late last week, the country's mines shut down, and each day equals $250 million in lost revenue, reports Joanne Von Alroth for Investor's Business Daily. The iShares MSCI South Africa (EZA) is taking a beating, since four of its top 10 holdings are mining companies, and 42% of the fund's assets are in the top five holdings.

The fund has had a rough week: it's down 4%. Year-to-date it's down 9.8%.

The outages aren't just hurting the mines: hospitals have to juggle surgeries, schools close, drivers have to cross their fingers at intersections, shops and restaurants lose customers, production drops and businesses shut down.

This is a good reminder of what we said earlier in the year about looking beyond the business section and being up on the news. It also pays to do some research and know what you own, too, especially when a fund is so heavily weighted in a sector on which a country is dependent.

Chile ETF Warms Up This Week

One of the top-performing exchange traded funds (ETFs) over the last week might come as a surprise after all the talk about short ETFs amid market turmoil.

It's the iShares MSCI Chile (ECH), launched in November 2007, which is up 13.8% this week. It's a single-country fund that's diversified over several sectors, reports Gary Gordon for ETF Expert. Half of the fund resides in utilities and industrial stocks, while 17% is in materials and 13% is consumer-related.

It also gives exposure to copper, a valuable metal in times when emerging markets are thriving. Chile accounts for one-third of the world's metal production. The country also benefits from literacy levels that reside near 100%, a high level of domestic investment and savings rates, and nearly 45% of its GDP is linked to foreign trade.

Bear's Giant Claw Hits Utilities ETFs

Exchange traded fund (ETF) investors, naturally, are looking to shield themselves from the roar of the bear. Most defensive hideouts are not safe, as even utility exchange traded funds (ETFs) are reeling.

Joanne Von Alroth for Investor's Business Daily reports that along with commodities and agribusiness, utilities are perceived as a safe haven. After all, people need water, gas and electricity.

Over the first 12 trading days of January, utilities ETFs still had the top-performance spot, and the decline was slow at 2.5%.

Last week, the panic began. Utilities, basic materials and energy all fell. The biggest slide came Tuesday, after the emergency rate cut by the Federal Reserve. The interest rate fear, mixed with recession worries have affected, among others:

• iShares Dow Jones U.S. Utilities (IDU)
• Vanguard Utilities (VPU)
  

Both funds experienced slides of up to 3.5%. The fear is undermined by the threat of global infection from the U.S. markets.

Coal ETF Mines the Opportunities

Last week, a new exchange traded fund (ETF) covering a commodity that had many asking, "Wait, wasn't there one for that already?" began trading on the American Stock Exchange.

Market Vectors Coal (KOL), as you might guess from the name, tracks an index made up of 60 companies involved in the mining or transportation of coal, manufacture of coal mining equipment and the production of clean coal.

But with coal's ubiquity and everyday use, one has to wonder what took so long for a fund that tracks the commodity to finally appear.

Overseas ETFs Suffer With U.S.

The U.S. recession fears are touching down on all parts of the globe, and exchange traded funds (ETFs) suffered along with world markets.

Trang Ho for Investor's Business Daily  reports that similar to the U.S. indexes, most bounced back after hitting new lows and closed in the middle of intraday trading prices, after Tuesday's emergency 75 basis-point cut.

The iShares benchmark combines 820 stocks from around the world, including the United States, Australia, and developed markets in Europe and Asia, undermined its August 2007 low. It ended at $69.48, 21% below its all-time high from mid-July.

Meanwhile, Germany's DAX Index was down 7.2% and was the most heavily sold off in all of Europe. iShares MSCI Germany (EWG) fell 10.5% to settle at 6.3%, closing at $30.20. It fell below the 200-day moving average, undoing all the progress of the past 10 months. On Wednesday, EWG lost another 1.9%.

iShares MSCI Xinhua/China 25 Index (FXI) fell 7.93% to 144.50. It  is 34% below its October high and is at a six-month low. On Wednesday, the fund reversed itself and rose 5.3%.

International sector funds have been hit as well, with utilities, basic materials and and energy falling the most.

Economic News Rattles Nerves and ETFs

The hits just keep on coming for the economy and exchange traded funds (ETFs). The Labor Department announced this morning that the rate of inflation was up by its largest amount in 17 years in 2007.

Martin Crutsinger for the Associated Press says that consumer prices jumped by 4.1%, compared with a 2.6% increase in 2006. Pumping gas and shopping for groceries became the most painful that it's been in years, as energy and food prices jumped by the largest amount since 1990.

Meanwhile, the Federal Reserve added to the bad news in a report that said output at the nation's factories, mines and utilities showed no growth in December.

The Fed is keeping a close watch on things to see if the price jumps push core inflation higher. Meanwhile, many are looking forward to their meeting at the end of this month, when it's expected that they'll cut interest rates by a half point.

Select Sector SPDRs Assets Grow in 2007

A family of exchange traded funds (ETFs) grew larger in 2007, money-wise.

Select Sector SPDRs' assets climbed $8.87 billion, or 51.95%, reports the Centre Daily Times. In terms of sectors, the Select Sector SPDRs Financials (XLF) pulled in the most assets, $5.02 billion - that's 122.94% growth.

Wait a minute. Isn't the financial sector hurting? Then why are so many assets flowing into it?

One possible reason, according to the director of wealth management at Select Sector SPDRs in an appearance on CNBC, is that investors may simply see a basket of funds as less risky than an individual stock. Minimizing your direct exposure in some sectors, especially ones that are hurting, can in turn minimize portfolio risk.

Dolan cites the example of Merrill Lynch (MER) vs. XLF. Last year, Merrill Lynch lost 41.3%. Contrast that with XLF, which lost 19.2%. Yes - still a loss, but a significantly lower one. It's another example of the benefits of ETFs and the instant diversification they provide.

Most of the other sector SPDRs ended the year in positive territory. The only one that lost assets was the Ultility SPDR (XLU), down 16.8%.

Utilities ETFs: The Lights Are On

Historians and investors are about as split as economists as to which way the market will go, but there are exchange traded funds (ETFs) that most can seem to agree on.

No matter what the market, bear or bull, the world still needs utilities to get by. Whether it is the global growth, the yield, or the supposed safe-haven status, utilities remain in demand. iShares Global Utilites (JXI) and WidsomTree International Utilities (DBU), while both down slightly in the last month, remain above their trendlines.

As of now, around three out of four stocks are trading below their 200-day moving averages, reports Gary Gordon for ETF Expert. Historians are likely turned off by the first five trading days of January which typically send a vibe about the possible outcome of the days and months ahead. When the first five trading days are negative, results are unattractive.

Gordon reminds us that the market moves higher on certainty and lower on uncertainty. A recession doesn't cause stocks to fall, it is the uncertainty about rough times ahead that causes volatility and sell-offs.

Chilean ETF Gives Copper Exposure

Chile is a quiet and lesser-known emerging market, but its exchange traded fund (ETF) is providing some valuable opportunities.

The iShares MSCI Chile Index Fund (ECH) in particular exposes investors to copper, a commodity that has been essential in growing economies. As we noted last year, copper is used in every major industry, and China is the biggest consumer of the metal. Chile is primed to get a boost as other emerging markets continue to thrive, since the country accounts for one-third of the world's metal production.

Zoe Van Schyndel of the Motley Fool breaks down the fund, which tracks an index of 30 stocks and was launched last November. Half of the assets are in utilities and industrial stocks, 17% are in materials and 13% are in consumer-related stocks.

Not only does Chile have a valuable commodity in copper, the country has several other factors working in its favor: it has a population of 16 million people and a literacy rate near 100%. There is a high level of domestic investment and savings rates, and nearly 45% of the country's GDP is tied to foreign trade.

If you're still waiting for a pure copper ETF, there isn't one yet, but you can also take a look at the PowerShares DB Base Metals (DBB), which holds one-third each of copper, aluminum and zinc.

Following Trends With ETFs

The exchange traded fund (ETF) winner's circle for 2008 has been assembled and examined by many.

Jonathon Burton for MarketWatch on Fox Business reports that Will Danoff, manager of Fidelity Contrafund, and Bill Gross, chief investment officer at Pimco, have their momentum-based expectations for ETFs in 2008.

Let's take a look:

Energy, materials and utilities were three of the S&P sectors that had greatest price appreciation in 2007. For exposure to those areas, take a look at Energy Select SPDR (XLE) or Vanguard Energy (VDE). For materials exposure: Materials Select Sector SPDR (XLB) or iShares Dow Jones US Basic Materials (IYM). For utilities, there is Utilities Select Sector SPDR (XLU) and iShares Dow Jones US Utilities (IDU).

Sam Stovall, chief investment strategist at Standard & Poor's, reminds us that momentum can turn on a dime. He cites the health care sector in 1991 as an example. It was up 50% for that year, but the following year it was down 19%.

Whatever trend you're following, just be sure to take a disciplined approach and remember to follow through with your strategy.

Energy Bill's Reach Could Go Beyond Related ETFs

President Bush's signing of an energy bill will have implications beyond our fuel consumption and oil-related exchange traded funds (ETFs).

The law calls for an increase in vehicle fuel efficiency standards, more use of biofuels, such as ethanol, and more energy-efficient homes and appliances, reports Steve Hargreaves at CNNMoney.com. Refineries will be required to replace 36 billion gallons of gasoline with biofuel by 2022, and no more than 15 billion of those gallons can come from corn-based ethanol because of concerns about food prices.

The fuel industry is the most obvious industry that will be affected by the bill, but a ripple effect will likely be seen elsewhere as the changes are implemented. Automakers have long said that raising fuel economy standards would be costly. Will the bill drive up car prices as they feared? There is no auto ETF at the moment. And what will it do to the cost of air travel?

The cost of appliances could rise, too. But as socially conscious consumers replace their old appliances with new energy-efficient ones, it could increase spending. Increasing the use of corn-based ethanol could drive up the price of the commodity.

Some of the ETFs that could be affected by the bill include:

• PowerShares DB Agriculture (DBA), up 29.1% since January inception. Corn futures are 23.5% of the fund.
• U.S. Oil Fund (USO), up 39.8% year to date
• PowerShares Dynamic Oil and Gas Services (PXJ), up 33.7% year to date
• PowerShares WilderHill Clean Energy (PBW), up 52.4% year to date
• Energy Sector Select SPDR (XLE), up 30.5% year to date
• Dow Jones Transportation Index Fund (IYT), up 0.5% year to date

Utility ETFs Prove Utilitarian

Utilities exchange traded funds (ETFs) don't conjure up images of glamour, but they do have staying power and tend to be more recession-proof than other sectors. They are considered the most stable performers during difficult market conditions and have been on a steady rise since 2003. Joanne Von Alroth of Investor's Business Daily reports that for the 12 sectors tracked by Morningstar, the utilities 3.43% rise made the group number one for the one month period ended November 27.

Subprime worries mixed with economic discomfort have investors searching for cover. And lets face it-everyone needs water, gas, electricity no matter what the economic conditions. Utility stocks also pay higher dividends than others.

To harness some of the power held by utilities look into:

• iShares Dow Jones US Utilities (IDU) up 16.9% year-to-date
• Utilities Select Sector SPDR (XLU) up 18.1% year-to-date

Hiding Out With Utility ETFs

All investment tools have strengths and weaknesses and exchange traded funds (ETFs) just happen to benefit the utilities sector. While one type of product may perform well for an area, another can be ill-suited.  Looking at the utility sector, these stocks tend to have higher yields, lower volatility and stable companies backing them.  Roger Nusbaum for TheStreet.com reports this time, closed-end funds didn't offer the benefits of the utilities sector.  The market price moved down more than the net asset value (NAV) and the sector.

iShares Dow Jones Utilities (IDU) captured the stability and low volatility offered by utilities stocks.  It is up 14.9% year-to-date and has a 2.4% yield.  Top holdings include Exelon Corp. (EXC) and Southern Co. (SO).

Market and ETF Facts to Consider

There's a lot going on in the markets and exchange traded funds (ETFs).  Matt Hougan for Index Universe looks at 10 interesting market facts and we've added some ETF related information.

1. The U.S. stock market is uneasy. Volatility is the best performing index this year, up 138.7% on the CBOE Volatility Index, compared to a year ago.
2. Technical analysis aside, the Dow Theory says "If the train slows down, the economy soon follows." iShares Dow Jones Transportation Average (IYT) is up 0.4% year-to-date.
3. Utilities are going off, as you may know from those huge checks you write each month. Utilities Select Sector SPDR (XLU) is up 15.7%.
4. Some indexes following Europe aren't as pretty as you may think, even with a strong currency.  Although we find the iShares S&P  Europe 350 Index (IEV) is up 14.7%. Isn't the euro worth more than gold right now?
5. European countries and their markets aren't always in sync. Performance ranges up and down, depending which country you're in. iShares MSCI Germany Index (EWG) is up 32% and iShares MSCI Belgium Index (EWK) is down 0.5%.
6. The China/Japan dichotomy, with such proximity, what gives? iShares MSCI Japan(EWJ) is down 1.3% and iShares MSCI Xinhua/China 25 Index (FXI) is up 66.9%.
7. Understanding contango in commodity investing is important.  It's confusing and has investors angry.
8. One of best domestic sector ETFs is Aerospace & Defense -PowerShares Aerospace and Defense (PPA) is up 24.6%. The worst sector is homebuilding - SPDR S&P Homebuilders (XHB) is down 53.4%.
9. Small-cap growth is doing well, maybe not as well as in recent past, but they are holding their own. iShares S&P SmallCap 600 Growth (IJT) is up 5.4%, compared to the S&P 500 which is up 3.6%.
10. Dividends aren't offering the safe haven thought of through tough markets. iShares Dow Jones Select Dividend Index (DVY) is down 6.0%.

Global Utilities Give ETF Portfolios A Jolt

Do you feel like your exchange traded fund (ETF) portfolio could use a jolt of energy? Lackluster earnings in other sectors have been zapped by weak earnings growth, the credit crunch and concerns about looming inflation. Energy, telecom and technology have kept the recent bull market from falling out and utilities have slid only the narrowest bit, reports Don Dion for Seeking Alpha. iShares S&P Global Utilities (JXI) is up 14.2% year-to-date and is up 37% from its inception a 14 months ago.

JXI is actually a recession-resistant ETF that displays slow, steady earnings, dividends and demand regardless of climate. Add global exposure and the prospects look good.

Global utility ETFs offer a combination of safe stocks, with exposure to growing markets and could help boost a lagging portfolio. Other global utility ETFs are:

• SPDR FTXE/Macquerie Global Infra 100 (GII)
• WisdomTree International Utilities (DBU)

Watch the SPDRs ETFs Grow

The Select Sector SPDRs exchange traded funds (ETFs) cover broad, general sectors of the market. Billions of dollars move into and out of those funds each week. A total of nearly $21.8 billion was invested in the Sector SPDRs at the end of the third quarter, which is an increase of 11.2% from the previous quarter. These ETFs and the percent change in their number of shares outstanding for the months of August to September, according to Index Universe, include:

• Materials Select Sector SPDR (XLB) - 16%
• Health Care Select Sector SPDR (XLV) - 5%
• Consumer Staples Select Sector SPDR (XLP) - 15%
• Consumer Discretionary SPDR (XLY) - 42%
• Energy Select Sector SPDR (XLE) - -13%
• Financial Select Sector SPDR (XLF) - -22%
• Industrial Select Sector SPDR (XLI) - 14%
• Technology Select Sector SPDR (XLK) - 7%
• Utilities Select Sector SPDR (XLU) - 8%

As shown, investors significantly increased their exposure to the consumer market through both XLP and XLY while they decreased their exposure to XLF and XLE. The overall increase in long interest on the SPDRs only tells half of the story though. They're also used often as shorting tools. Short interest for all the SPDRs fell from 53% in August to 42% in September. XLF had the highest short interest in September at 118.5%, followed by XLE at 78.7%. XLK had the lowest level of short interest at 5.7%, followed by XLV at 8.4%.

Why It Can Pay for ETF Investors to Watch the Weather

Although it might not be the first thing that comes to mind when thinking of investment tools, the weather can be a factor in some exchange traded funds' (ETFs) performance. For example, wheat prices have been increasing because of global droughts, which affects agriculture ETFs such as the PowerShares DB Agriculture (DBA). Currently, DBA is up 7.2% for the last three months, having launched in January.

However, some critics caution that weather predictions aren't helpful for investors because they're just forecasts. One expert reminds us that the U.S. was supposed to have a severe hurricane season this year, but we didn't, reports Darla Mercado for Investment News. Hurricanes can affect commodities such as oil and oil futures ETFs. In fact, back in August when Hurricane Dean was developing and investors were worried that it would hit the Gulf of Mexico and damage many oil and gas installations, energy ETFs saw a flurry of activity. Severe storms also can affect utilities ETFs in the same manner. So next time you watch your local weather forecast, think about how it could or could not impact your ETF portfolio.

Power Demand and Emerging Market ETFs

Could exchange traded funds (ETFs) be a solution to the problem of power shortages within emerging-market countries?

Reinhardt Krause for Investor's Business Daily says power demand grows quicker than the economies of some emerging-market countries. Consider that some utilities in emerging markets pay better dividends than those in the U.S. Our utilities aren't growth stocks, and demand barely keeps up with the pace of the economy. In Latin America, electricity demand is growing much faster than here in the U.S. Most Latin American utilities provide above 5% dividend yields, some over 10%, which is well above the average U.S. utility. Globally, electricity demand is expected to double by 2030, and China is expected to have the most usage. In the meantime, consider some of these ETFs and their year-to-date performance:

• iShares S&P Global Utilities (JXI) - up 9.8%
• WisdomTree International Utilities (DBU) - up 8.7%
• iShares MSCI Emerging Markets (EEM) - up 20%
• Vanguard Emerging Markets Stock ETF (VWO) - up 24.7%
• BLDRs Emerging Markets 50 ADR Index (ADRE) - up 22.9%

How Utility ETFs Could Benefit Your Portfolio

Utility exchange traded funds (ETFs) are one option for diversification in an investor's portfolio. There is also the added benefit of diversification within the sector in areas such as electric utilities, natural gas, and generators. Utilities also offer an opportunity for dividend payouts, which can be another bonus. With the recent credit crunch, consumers are more likely to pay their utility bills than buy discretionary goods, which could bode well for utility stocks and ETFs.

Make sure to research these ETFs before purchasing to ensure they fit with your financial goals and know what separates them from their competitors. Below are some different utilities ETFs to consider and their year-to-date performance:

• PowerShares Dynamic Utilities (PUI) - down 1.0%
• Utilities HOLDRs (UTH) - up 9.5%
• Utilities Select Sector SPDR (XLU) - up 8.1%
• Vanguard Utilities ETF (VPU) - up 7.7%
• iShares Dow Jones U.S. Utilities (IDU) - up 7.3%

Places to Go When ETFs Plummet with the Market

When the markets and exchange traded funds (ETFs) get shaky, investors have several safety shelters: Health care, consumer staples, large-cap, utilities, mega-cap, fixed-income are a few options that tend to ride the volatile market waves well. Yet there's another perhaps more obvious choice that gets overlooked sometimes and that is: cash, says Donald H. Gold for Investor's Business Daily.

Our investment strategy calls for exiting the market when it dips below the long-term trend line or is 8% off the high. At that point, we put the proceeds into cash. This helps protect gains made as well as prevent further losses. This doesn't mean we stop looking for the next investment opportunities.

Be aware that switching to cash via money-market funds has come under fire lately because many were found to invest in instruments backed by subprime mortgage loans.

Bridging Your Investments to Infrastructure Through ETFs

No single exchange traded fund (ETF) exists that is a pure play on infrastructure. Last week's disaster of the Minneapolis bridge collapse brings to mind how much repair and money is needed to alleviate this shortcoming. The American Society of Civil Engineers (ASCE) rated 27% of the country's 90,750 bridges structurally deficient or they functionally obsolete. It will cost $9.4 billion a year for 20 years to fix all the problems, reports the ASCE. Trang Ho for Investor's Business Daily reports that when the government pours trillions of dollars into something, many companies can capitalize.

Some ETFs to bridge government infrastructure spending and your investments include SPDRs Macquerie Global Infrastructure 100 (GII) and the PowerShares Global Water Portfolio (PIO). Although GII holdings are mostly utilities, many are engaged in engineering and development. PowerShares Building and Construction Portfolio (PKB) can be another way to access development, however, 12% is concentrated in consumer and home-building names.

Utility ETFs Get Zapped

It's no secret that utility exchange traded funds (ETFs) have taken a beating over the last quarter. However, they do have some important benefits. The utilities sector has generally yielded great long-term returns. They also tend to be well-diversified in areas such as electric utilities, natural-gas utilities, telecom and a variety of energy-related stocks. Utilities offer a good opportunity for dividend payouts, which can be another perk.

On the other hand, utility ETFs have had a rocky performance since mid-May and were hit hard by the market drop last week.  It marked the first time this sector dropped below the trend line. Although it looks as if the utility ETFs are making a come back, wait until they are at least 3% above their individual trend lines before purchasing.

Some of the utility ETFs and their performance year-to-date:

• Utilities HOLDRs (UTH) -  up 6.8%
• iShares Dow Jones U.S. Utilities (IDU) - up 7%
• Utilities Select Sector SPDR (XLU) - up 7.1%

Utilitiy ETFs Stands Out

The utilities exchange traded funds (ETFs) were one of the top performing sectors for the first quarter. Utilities Select Sector SPDR (XLU) was up 8.4%.  PowerShares Dynamic Utilities (PUI) gained 6.6% in the quarter and features 38 stocks, reports Murray Coleman for MarketWatch.com.  It's a good mix of different types of utilities from generators to natural gas producers.  Valuations for the industry are steep and there doesn't seem to be any serious correction in coming quarters. Utilities are defensive in nature and make a good dividend play, which could keep them in high demand.

ETFs Under Pressure

During the recent market correction, two sectors and the exchange traded funds (ETFs) that track them, fared well. Simultaneously, investors were looking for safety and energy prices were rising. Energy ETFs handled the stress well as did global utility funds.  Carl Delfeld of Chartwell Advisor notes the price of crude oil rose over $60 a barrel, helping energy ETFs, such as iShares S&P Global Energy (IXC).  As investors looked for safety, iShares S&P Global Utilities Sector(JXI) represented a "classic defensive sector".

The question is, are these ETFs just handling the stress better than other ETFs or are they starting a long-term trend?  Watch the ETFs and their 200-day moving average to get a better idea.

Utility ETFs Are An Option

Many investors are seeking exchange traded funds (ETFs) in safety stable sectors such as utilities.  Utilities are often used during corrections because they tend to be less volatile in comparison with the rest of the market with steady earnings.  Trang Ho for Investor's Business Daily says individual investors are better off in cash during these corrections, even if utilities are more stable.

Below are the utility ETFs and their year-to-date performance:

• S&P Select Utilities SPDR (XLU) 2.3%
• Utilities Holdrs (UTH) 0.5%
• iShares Dow Jones U.S. Utilities Sector Index (IDU) 1.8%
• Vanguard Utilities (VPU) 1.9%

GII ETF A Utility Fund?

State Street recently launched an exchange traded fund (ETF) tracking infrastructure, the SPDR/FTSE Macquarie Global Infrastructure 100 (GII).  Roger Nusbaum in TheStreet.com analyzed the fund and questions whether the ETF is an infrastructure or utility fund.  Looking at the make up of the ETF, 90% of the holdings are utility companies, the top 10 holdings are all utilities and 38% of the ETF is U.S. companies.  To be sure, the ETF also holds energy (5%), industrials (4%) and telecom (2%) companies as well.  Although U.S. companies make up a large portion of the overall holdings, there are only two in the top 10.

Nusbaum goes on to compare the ETF to other utility ETFs, such as iShares S&P Global Utilities Sector (JXI) and WisdomTree International Utilities Sector (DBU) he states that the holdings are similar although the weighting is different.  Given some time, this ETF may or may not prove that it is an infrastructure or utility fund.  As with any investment it is prudent to look under the hood to see what you are getting and then determine if it fits in your portfolio.

ETFs And Global Warming

Should exchange traded fund (ETF) investors consider global warming an economic issue? The economic impact of global warming could only be decades away, with increased public awareness and a newly settled Democratic congress in Washington, some sectors may be exposed to environmental regulation. Jonathon Bernstein of ETF Zone has a key term "carbon-constrained economy" where the constraint (regulation) will impact many sectors such as those listed below.  These sectors have had a nice run, benefiting from a regulatory-friendly government, however, regulation is only part of their success.

• Oil and Gas: One of several ETFs in this sector is the Energy Select Sector SPDR (XLE), which have reaped the rewards of the global commodity boom that has tripled the cost of oil.  XLE is up 27% for 3-years.
• Electric Power: A decline in bond yields has moved investors to reliable dividend paying utilities.  Utilities Select Sector SPDR (XLU) and other utility ETFs have done well in a broad market characterized by stagnation.  Over the past 3-years, XLU is up 19%.
• Metals and Mining: Raw materials have risen along with the commodity boom which has sharply increased the price of metal. Metals and Mining SPDR (XME) has India and China's demand for raw materials to thank.  XME is a new ETF, but it is up 15% over the past 6-months.

Many of the factors that have kept these sectors aloft are changing or may do so soon. Risks for environmental regulation are becoming more obvious, although Wall Street has yet to reward companies that think green, it may happen sooner than we think.

Utility ETFs Moving

Why have utilities been moving and nobody is paying attention?  The utilities have been one of the best performing exchange traded funds.  As this sector tends to be overlooked, "our utilities are unsung but reliable constants in practically every daily action," according to Beth Gaston Moon in Forbes.

The ETFs representing utilities have reached new highs recently and are up on average 13% for the year.  Amex Utilities HOLDRs Trust (UTH) and Select Sector SPDR Utilities (XLU) both hold Southern Company (SO) and Exelon (EXC) in their top weighted holdings.  Both of these companies have been performing well and SO is the largest distributor of electricity in the nation.

Utility ETF (UTH) Can Electrify Your Portfolio

With the economy slowing down, an increasing number of investors are putting their money into utility stocks due to their stable earnings & high dividend yields. Click here to see the strength in utility sector since May 19.

In most states, electricity infrastructure is 20-25 years old & requires a substantial amount of investment on behalf of the utility companies. With the recent blackouts in major cities, state officials have started paying more attention to electricity grids. There are talks about subsidizing investments in electricity infrastructure by utility companies.

Investors can benefit from this trend by investing in the Utilities HOLDRs (UTH) exchange traded fund.

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Yaser Anwar is a guest author at ETFtrends & the editor of Investment Ideas by Yaser Anwar blog. The author of this article is not a registered financial advisor & does not give investment advice. This article does not comprise any solicitation to buy or sell securities, ETFs or other investment vehicles.

Utility ETF (XLU)

The utility stocks are usually viewed as boring and conservative and known for their consistent profit growth.  Lately the industry has been going through consolidation and the stocks have been performing.  Utilities tend to do well in times of economic uncertainty.  For the past month the Utilities Select Sector SPDR (XLU) exchange traded fund was up 5%.  Top holdings in this ETF include Exelon Corp. (EXC), Duke Energy (DUK) and TXU Corp. (TXU).  Up 11%, 10% and 21% respectively for the year.

Utilities ETFs Lead the Pack in 2005

Typically known to be boring and conservative, utilities stocks have been on fire this year. Eclectric energy, nuclear energy and natural gas continue to offer logical alternatives to global oil demand. Utility based ETFs offer greater diversification to the DOW JONES UTILITIES INDEX (^DJU). 

    

Three utilities ETFs include iShares Dow Jones US Utilities (IDU), Utilities Select Sector SPDR (XLU) and Vanguard Utilities VIPERs (VPU).

Forward earnings look promising which may indicate the trend in utilities stocks might continue. Here's a look at The Dow Jones Utilities Index compared to the S&P 500 Index over the last year.