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10 Best New ETFs of 2011


These 10 exchange traded funds could be worth a closer look in 2012, no matter what happens with the broad economy.


2011 was a record year for the ETF industry in a number of ways. Assets under management cracked the important $1 trillion level for the first time, cementing the product as a staple in the investing world. The industry also saw a host of new launches as well, as more than 300 funds made their debut over the course of the year giving investors fresh options in everything from bonds and U.S. equities, to emerging market debt and international markets.

Yet, while many of these funds look to be quality products-and some admittedly not so much-a few definitely stood out as truly landmark launches in the industry. These products either hit new niches or give exposure to previously untouchable asset classes, greatly helping investors to put their assets in the desired spots. Below, we highlight 10 of our favorites from this group which could be worth a closer look by all in 2012, no matter what happens with the broad economy:

AdvisorShares Active Bear ETF (HDGE)

This ETF seeks to give investors exposure to a basket of equities that have been shorted, acting as a both a market hedge and a potential outperformer when markets are sinking. However, it should be noted that the fund doesn't just randomly short a bunch of stocks; instead it seeks to find a group of companies that have low earnings quality or aggressive accounting practices and short a basket that have those characteristics. In total, the fund shorts between 20 and 50 equities across a variety of sectors creating a nice hedge against adverse market movements. Unfortunately, HDGE is one of the more expensive ETFs on the market today, charging close to 3.3% a year in fees thanks to a hefty 1.44% charge for short interest expense. It didn't seem to matter for the fund too much though in terms of overall return, as the product has greatly outperformed broad markets over the past six months (read The Active Bear ETF Under the Microscope).

ETF Securities Physical Asian Gold Shares (AGOL)

Gold investing has been extremely popular with ETF investors as commodity-backed funds represent a very liquid and cheap way to play the markets. Yet, some investors remain concerned that Western governments, in their infinite wisdom, may be prone to gold confiscation in the near future, much like what Americans saw in the 1930s. This situation has caused many investors to consider holding gold outside of the UK and the USA and in other markets. One of the more popular choices is arguably Singapore, the island nation in Southeast Asia (read Top Three Precious Metal Mining ETFs).

Described by some as the Switzerland of the region, Singapore enjoys a high standard of living, transparent government, and great investor protections making it a top choice for investors to store gold. In light of this, ETF Securities, the issuer behind a number of other popular precious metal products, debuted a gold-backed ETF which holds the metal in secure vaults in Singapore. This has proven to be a good choice for those seeking to diversify their gold exposure as the fund has managed to amass over $70 million in assets in less than a year, suggesting that many investors are concerned about the safety of their gold holdings and are open to alternatives.

First Trust NASDAQ CEA Smartphone Index Fund (FONE)

If one sector of the economy has been a growth area over the past few years, it has undoubtedly been the smartphone space. This corner of the market has seen rapid growth, wide spread adoption and continues to buck the trend of weak consumer spending. Thanks to these events, First Trust decided to put out an ETF targeting the space, FONE. The product seeks to give broad exposure to the industry across three key sectors; handsets, software applications & hardware components, and network providers. The fund holds 70 securities in total and could be an ideal play for investors looking for concentrated exposure to this slice of the market in 2012 (see Alternative ETF Weighting Methodologies 101).

FactorShares ETFs

While spread trading-the simultaneous buying of one security and the selling of another, related one-has always been popular among short-term traders, the idea hasn't really caught on with ETF providers, until recently. The new ETF provider, FactorShares, recently debuted a lineup of five products which look to give investors leveraged exposure to popular spreads including S&P 500 Bull/USD Bear, Oil Bull/S&P 500 Bear just to name a few. While the products still aren't the most popular, trading volumes are often pretty low for the funds, they could be a unique way for investors to trade a number of markets cheaply and quickly in a way that other ETFs simply do not provide at this time (read ETFs vs. Mutual Funds).

Global X Pure Gold Miners ETF (GGGG)

(GDX), the ultra-popular gold miner ETF from Van Eck, remains the go-to choice for those looking for exposure to gold mining firms in basket form. However, an upstart from Global X, the Pure Gold Miners ETF, could offer a potentially better way to play the market than its more established cousin. That is because GGGG only focuses on companies that derive at least 90% of their revenues from gold mining whereas GDX has no such distinction. While this may seem like a small issue, it results in a completely different holdings profile for GGGG when compared to GDX (see Top Three Precious Metal Mining ETFs). This could be a good thing as it could result in a portfolio of securities that is more heavily correlated to the price of gold. After all, when investors buy up gold miners isn't a high correlation to gold prices what they are after in the first place?

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