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Improved Returns Cast Mirage on ETF Market

Stocks in this article: PSRPSAUDTO

It paid to be in real estate and gold in December, notably via the PowerShares Active Real Estate Fund (PSR) and PowerShares Global Gold and Precious Metals Portfolio (PSAU). You also would have made money shorting oil using the PowerShares DB Crude Oil Double Short ETN (DTO).

But what made last month different was the various fund types that generated returns. (See the table at the end of this story.) There were country-focused funds such as the Nets S&P/ASX 200 Index Fund (AUS) and the Claymore China Small Cap ETF (HAO).

Others include the PowerShares Dynamic Leisure & Entertainment Portfolio (PEJ), which invests in companies including McDonald's (MCD), International Game Technology (IGT), Carnival (CCL), Starbucks (SBUX) and Walt Disney (DIS).

Add to this a large-cap value fund, Elements (BVL); an ETF that is bullish on the euro, Market Vectors Double Long Euro (URR); an extended duration government Treasury fund, Vanguard Extended (EDV); and a balanced fund TDX Independence (TDN), and you have one of the more diverse lists of top performers I have seen in a while.

Such an eclectic group of funds signifies volatility across the board and suggests a lack of a sustainable trend. Investors unwilling and unable to take substantial risk should not play this market. They would be better served to wait until mid-2009 before making an assessment of whether to invest.

Note that at some point, after all the bad news keeps coming, an appetite for risk will return to those who have capital left, and we may see a gradual movement of investment dollars back into the markets. But for now, there are too many problems, not the least of which is that the full effect of the crisis has not yet been felt in overseas economies.

December's ETF Gainers
The funds generating returns for the month ran the gamut.
Ticker
Name
Category
1 Month Return
PSR
PWERSHRES ACT US REAL ESTATE
Sector Fund-Real Estate
44.81
DTO
POWERSHARES DB OIL 2X SHORT
Commodity
44.64
PSAU
POWERSHARES GLOBAL GOLD AND
Sector Fund-Precious Metals
29.2
BVL
ELMNTS LKD BEN GR L/C VAL TR
Value-Large Cap
28.54
GDX
MARKET VECTORS GOLD MINERS
Sector Fund-Precious Metals
27.51
FIO
ISHARES FTSE NAREIT INDUSTRI
Sector Fund-Real Estate
25.56
SZO
POWERSHARES DB CRUDE SHORT
Commodity
24.12
ULE
PROSHARES ULTRA EURO
Sector Fund-Undefined Equity
21.81
HAO
CLAYMORE CHINA SMALL CAP ETF
Country Fund-China
21.61
EDV
VANGUARD EXTENDED DUR TREAS
Govt/Agency-Long Term
20.95
URR
MARKET VECTORS DBLE LNG EURO
Currency
19.66
PEJ
POWERSHARES DYN LEISURE&ENT
Sector Fund-Leisure Industry
19.45
BOM
POWERSHARES DB MTLS 2X SHORT
Commodity
19.31
AUS
NETS S&P/ASX 200 INDEX FUND
Country Fund-Australia
19.21
IPN
SPDR S&P INT INDUSTRIALS SEC
Sector Fund-Undefined Equity
19.15
FXR
FIRST TRUST INDST/PRODUCERS
Sector Fund-Undefined Equity
18.94
TDN
TDX INDEPENDENCE 2030 ETF
Balanced
18.92
LIS
NETS PSI 20 INDEX FUND
Region Fund-Geo Focused-Eqty
18.5
SCO
PROSHRE U/S DJ-AIG CRUDE OIL
Sector Fund-Undefined Equity
18.4
DEE
PWR DB COMMODITY DOUBLE SHOR
Commodity
17.92
Source: TheStreet.com Ratings

Sam Patel, CFA, is the manager of mutual fund research for the TheStreet.com Ratings.

In keeping with TSC's Investment Policy, employees of TheStreet.com Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Patel cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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