It’s an exciting time to be investing in exchange traded funds (ETFs) as new products launch practically every day. With so many newbies on the market, Matt Hougan for Index Universe offers his opinion on the top five ETFs that could change the industry:
- PowerShares DB G10 Currency Harvest (DBV)
Granted it might not be the best time to highlight this ETF because it sold off sharply during the recent market turmoil, but it has brought institutional strategies to the average investor at low costs more successfully than most. As a "carry trade ETF," DBV buys various currencies with high interest rates (such as the popular Japanese yen) and shorts currencies with low interest rates, which has proven an effective strategy so far.
- PowerShares DB Commodity Index Tracking Fund (DBC)
DBC is a revolutionary ETF because it’s the first broad-based commodity futures ETF and provides an "optimum yield" strategy. This broad-based ETF should help protect against contango and backwardation issues that lurk in the commodities sector.
- Vanguard Europe Pacific ETF (VEA) and Vanguard Emerging Markets ETF (VWO)
These ETFs are direct competition to Barclays’ iShares MSCI Emerging Markets Index (EEM) and iShares MSCI EAFE Index (EFA). It all comes down to expense ratios: VEA’s is 0.15% compared to EFA’s 0.35% and VWO’s is 0.30% compared to EEM’s 0.75%.
- UltraShort QQQ ProShares (QID)
Leveraged ETFs are riskier than the average ETF, no doubt about it. For those investors who can handle the risk and understand these investment options, QID has had an impressive performance. It offers 200% short leverage for 0.95% in expenses.
- WisdomTree Emerging Markets High-Yielding Equity ETF (DEM)
Dividend ETFs are nice because investors are guaranteed regular dividends. DEM gives a lovely 6.5% yield.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.