This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

10 ETFs That Are Worth The Risk

Stocks in this article: ITESHYFXY

Investments whose potential rewards outweigh their risks are hard to find, but they exist.

If the usual financial gauges aren't generating worthwhile options, consider using a different yardstick: the Sharpe ratio. It's the classic measure of risk and return developed by Nobel laureate William Sharpe in 1966.

To calculate a fund's Sharpe ratio, take its return and subtract the "risk-free rate," the theoretical return on securities with no default risk, such as short-term Treasuries. The difference is then divided by the fund's standard deviation, a volatility measure that reflects how far returns stray from past averages.

The 10 exchange traded funds below have Sharpe ratios of 1 or more. Seven of them hold A-plus grades from TheStreet.com Ratings.

With the stock market on the fritz, the Sharpe ratio favors fixed-income and currency funds. The SPDR Barclays Capital Intermediate Term Treasury ETF (ITE), which has returned 7.3% in the past year, had the highest Sharpe ratio. The fund tracks an index of fixed-rate, non-convertible Treasuries with at least one but no more than 10 years until maturity and at least $250 million in outstanding face value. The index excludes special issues, such as Treasury inflation-protected securities, or TIPS.

10 ETFs With High Sharpe Ratios
Fund (Ticker) Rating
Total Return 1 Year
Sharpe Ratio
SPDR Barclays Capital Intermediate Term Treasury ETF (ITE) A+
7.27%
1.26
iShares Barclays 1-3 Year Treasury Bond Fund (SHY) A+
3.74%
1.19
CurrencyShares Japanese Yen Trust (FXY) A
17.35%
1.17
PowerShares VRDO Tax Free Weekly Portfolio (PVI) A+
3.34%
1.14
iShares Barclays 3-7 Year Treasury Bond Fund (IEI) A+
7.37%
1.11
iPath JPY/USD Exchange Rate ETN (JYN) A
18.42%
1.10
iShares Barclays Short Treasury Bond Fund (SHV) A+
1.93%
1.08
Vanguard Extended Duration Treasury ETF (EDV) C+
26.24%
1.07
iShares Barclays 7-10 Year Treasury Bond Fund (IEF) A+
10.24%
1.05
iShares Barclays MBS Bond Fund (MBB) A+
6.96%
1.00
Source: Bloomberg & TheStreet.com Ratings

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,677.90 +216.58 1.32%
S&P 500 1,950.82 +23.71 1.23%
NASDAQ 4,452.7920 +69.9450 1.60%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs