6 ETF Opportunities in Challenged Markets | ETF Trends

The stock market may seem like a double-edged sword right now. Despite nearly doubling from its March 2009 lows, there are still potholes ahead. But the best times to invest are before everything seems fine and dandy. That’s why exchange traded funds (ETFs) may offer an attractive place to put your money when the trend appears.

According to Arohan of Personal Dividends, stocks and real estate prices are cheaper today than they have been in a long time. He warns that there will be short-term volatility and some downside risk. But over the long haul, these investments could provide some decent gains. [Why Homebuilder ETFs Have Appeal.]

  • First Trust S&P REIT Idx (NYSEArca: FRI): There’s no longer an ETF that represents a direct way to play housing prices; REIT and homebuilder funds are two of the existing ways to get exposure to this recovering sector. FRI holds a mix of residential, retail, office and industrial REITs.

  • SPDR S&P Homebuilders (NYSEArca: XHB)

One reason why stocks and real estate are attractive is that comparatively, bonds are not. The massive amounts of Federal debt nearly ensure that interest rates will rise and bond prices will drop, leaving long-term bonds vulnerable. Inflation could also kick in as all the stimulus and bailout money make its way into the economy. Typically, stocks and real estate tend to rise with inflation. [Listen to Our Latest Podcast.]

  • Rydex S&P Equal Weight Consumer Staples (NYSEArca: RHS): According to Arohan, consumer staples perform well in an inflationary environment.

  • PIMCO 1-3 Year U.S. Treasury Index (NYSEArca: TUZ): Short-term bonds should be in a less vulnerable position than long-term ones if interest rates rise.

Emerging markets are also an attractive place to invest, reports Arohan. For the most part, emerging markets did relatively well over the past two years, and the demographics of these markets should continue to drive their respective economies. However, because of their success, asset prices in emerging markets will likely be expensive relative to prices in developed markets. [5 Reasons to Pay Attention to Emerging Markets.]

  • iShares MSCI BRIC Index (NYSEArca: BKF): The BRICs are Brazil, Russia, India and China; they’re four of the fastest-growing emerging economies in the world.

  • Vanguard MSCI Emerging Markets (NYSEArca: VWO): VWO is one of the fastest-growing ETFs these days and is one of several ways to get broad exposure to emerging markets.

You’ve probably noticed that many of these funds are heading south and approaching their 200-day moving averages. With the markets as challenged as they have been the last couple of days, it may be prudent to wait until the trend reappears before thinking about opportunities in these and other areas. [How to Follow Trends.]

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

Sumin Kim contributed to this article.

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.