The Worst-Performing ETFs of 2008

This segment of the market has been engulfed in a vicious cycle with the economy contracting. "The real estate sector is driven in large part by the economy and job growth," said Royal Shepard, an analyst for Standard & Poor's. "The default rate for commercial real estate has actually been quite low, but there has been a growing concern that this might increase."

Real estate has traditionally been rich in terms of dividend yields, but more recently, firms have been tightening their belts. "A lot of companies are slashing their dividend payments to conserve cash," Shepard said. "I think this is a trend that we will see continue."

Shepard notes that multifamily REITs have held up better. "The multifamily space will continue to outperform as long as Fannie Mae(FNM) and Freddie Mac(FRE) remain viable entities," he said.

Green energy in the red: With a year-to-date return of minus 69.7%, the PowerShares WilderHill Clean Energy Fund(PBW) proved to be a basement-dweller. The fund holds names such as Ener1(HEV), First Solar(FSLR) and Energy Conversion Devices(ENER).

One money manager attributes part of the decline of this ETF to a repricing of risk. "Anything energy-related took a vicious beating this past year," said Matthew Tuttle, president of Tuttle Wealth Management. "Stocks that are more speculative in nature such as clean energy took even more of a hit."

Tuttle said this ETF will face adversity in the short term, but it has promising long-term prospects. "2009 is still going to be a very tough year for clean energy and the market in general," he said. "Eventually the sector will be a great place to be, since there will be a great push and focus by this next administration on clean energy."

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