This Day On The Street
Continue to site
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

10 ETFs That Are Worth The Risk

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 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+
iShares Barclays 1-3 Year Treasury Bond Fund (SHY) A+
CurrencyShares Japanese Yen Trust (FXY) A
PowerShares VRDO Tax Free Weekly Portfolio (PVI) A+
iShares Barclays 3-7 Year Treasury Bond Fund (IEI) A+
iPath JPY/USD Exchange Rate ETN (JYN) A
iShares Barclays Short Treasury Bond Fund (SHV) A+
Vanguard Extended Duration Treasury ETF (EDV) C+
iShares Barclays 7-10 Year Treasury Bond Fund (IEF) A+
iShares Barclays MBS Bond Fund (MBB) A+
Source: Bloomberg & Ratings
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, 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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SHY $85.04 0.04%
SHV $110.40 0.02%
FXY $90.25 -0.35%
JYN $50.79 1.05%
ITE $61.13 0.20%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs