The other top area for ETFs were those focused on Treasury Bonds, which were a focal point for investors this year as they sought safety from the turbulent markets. In fact, the investor rush to these funds caused yields to hit lows not seen in decades. One auction of short-term Treasuries this month brought a 0% yield – and investors still snapped them up at an unprecedented pace.

The top-performing Treasury ETF was the Vanguard Extended Duration Treasury Index (EDV), which finished the year up 49.3%. This fund seeks to track the performance of an index made up of extended-duration zero-coupon U.S. Treasuries. The yield on this fund is 2.79%.

Other top Treasury ETFs this year returned between 25%-35%:

  • iShares Barclays 20+ Year Treasury Bond (TLT)
  • SPDR Lehman Long-Term Treasury (TLO)
  • PowerShares 1-30 Laddered Treasury (PLW)

The Japanese yen also had a solid year, with two ETFs focused on the currency delivering solid double-digit returns for the year. The Currency Shares Japanese Yen Trust (FXY) and iPath JPY/USD Exchange Rate ETN (JYN) ended 2008 with double-digit returns of more than 20%.

Japan’s Nikkei just closed its worst year ever, down 42%. The stronger yen has no doubt had an impact on an economy that’s already struggling, as it further tamps down demand for exports that have become more expensive to foreigners. Japan’s manufacturers are planning the biggest job cuts they’ve seen in 35 years.

The top long equity ETFs were focused on gold, closing out the year with gains in the low single digits – around 4%.

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