Asset classes are important to most investors and exchange traded funds (ETFs) are helping progress within specific market segments. Matthew Hougan for Seeking Alpha reports that there are some areas of the market that are worth monitoring.

  • Small-Cap International: Correlations between large-cap stocks are tightening all over the world, and will continue to do so. Small-cap international stocks will continue to retain diversification benefits as they are tied to local economies. WisdomTree International Small Cap Dividend Fund (DLS) and the SPDR S&P International Small Cap ETF (GWX) are two ETFs that will give this exposure.
  • China: China should continue to be a long-term boom, and global indexes tend to be underweight China thanks to the hegemony of free-float investments. SPDR S&P China ETF (GXC), iShares FTSE/Xinhua China 25 Index (FXI) and PowerShares Golden Dragon Halter (PGJ) can help access this country.
  • Japan: One of the best things Japan has in its favor now is its proximity to China. Valuations point to upping exposure to Japan.
  • Bond Diversification: New bond ETFs are pouring into the industry, and they should fit into portfolios some how, many are just not sure how yet.
  • Thematic Asset Classes: Water, timber, energy efficiency- these are all available for investors through ETFs and the great ideas keep coming. The Claymore Timber ETF(CUT) is the latest.
  • Coming down the pike: There is no doubt 2008 will bring lots of interesting ETFs, and the pipeline is full of funds waiting for registration. Stay tuned…

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.