TheStreet.com Ratings: The Top Five ETFs to Buy Now

Editor's Note: TheStreet.com earlier today announced the purchase of certain assets of Weiss Group to form "TheStreet.com Ratings." Here is the first article from Rudy Martin, TheStreet.com Ratings director of research. Let us know what you think of the article by clicking here.

If you're interested in investing in exchange-traded funds, you won't want for choices: As of midyear, there were 281 exchange-traded funds in the U.S., with approximately $350 billion in assets. Of these, international and sector funds drew the biggest asset inflows: $27 billion year to date.

However, all of these choices doesn't make it any easier to choose. And that's where we come in.

What top five ETFs does our model currently like?

Before we start, a few caveats about our approach. The ETF ratings model is momentum-driven. At the start of a bullish trend, it will detect performance changes and weigh these against past performance and volatility. In addition to pricing and returns, it will rank a fund on expense efficiency and downside risk. The net result is a mechanical trading process that can be applied systematically and easily -- week after week -- to derive trading ideas and review trends.

That's the good news.

Unfortunately, past performance is not a guarantee of future results. The exchange-traded funds industry is morphing from simple, passive, index-based baskets into new forms of actively managed funds. Although we rate a total of more than 16,000 funds, including stocks, bonds, closed-end and exchange-traded funds, we do not currently rate all funds and probably never will.

Some funds are too new or specialized to be of general interest or useful. Also, the secret of our system is that it is a quantitative approach that removes the speculation and human emotion that typically influences buy and sell decisions.

But computers can occasionally be wrong. Use this list as a guide for your own homework and discussions with others.

Here's the list, and then some of the things you should keep an eye on when investing in ETFs.

It's no surprise that first on the list is the iShares S&P Global Energy (IXC) exchange-traded fund.