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Nine ETFs for an Uncertain '09

Gearing up to invest in 2009 is like driving in a tropical storm: vision is severely limited and there's no way of knowing what conditions will be like a mile ahead. The going could be twice as bad or, then again, it just might turn out to be quite sunny and pleasant.

In the current discouraging economic environment, "going to the mattresses" of low-yielding money market funds or even certificates of deposit might sound appealing. But many economists are forecasting a resumption of growth in the second half of 2009, and equity markets are famous for anticipating expansions six to 12 months before the fact. Because the biggest gains are frequently made in the incipient stages of bull markets, an argument exists for maintaining some equity exposure. Ratings searched for exchange-traded funds appropriate for surviving the many financial crosscurrents that are complicating the current investment milieu. After scrutinizing the 800-plus ETFs in our database, we selected the nine funds in the accompanying table as ones we believe are worth considering for '09.

With continuing aftershocks of the credit crunch a distinct possibility and a lingering global recession a virtual certainty, the dual blessings of a healthy dividend yield combined with the backing of the U.S. Treasury would make a Treasury bond fund a solid choice for these treacherous times.

But a growing chorus of pundits is expressing fear that the gargantuan injections of money to stimulate the economy will ultimately result in persistent inflation, which will likely result in higher interest rates and lower quotes for bonds. That makes an inflation-protected Treasury bond fund like the iShares Lehman TIPS Bond (TIP) a conservative, sensible fixed-income vehicle.

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