Of the 10 best-rated exchange-traded funds this month, not one holds common stocks.
Most of those ETFs, with "excellent" ratings of A-plus, are designed to track the price and yield performance of various maturities and segments of the fixed-income market.
The most highly rated ETF for investing in intermediate-term U.S. government bonds is the iShares Barclays 3-7 Year Treasury Bond Fund (IEI). For the 12 months ending in January, the fund rose 6.95%.
The second best-rated ETF this month is from the same iShares family of funds, but instead focuses on longer-term U.S. Treasury bonds of the Barclays Capital 10-20 Year Treasury Index. Outperforming the other nine funds listed below, with a return of 8.54%, is the iShares Barclays 10-20 Year Treasury Bond Fund (TLH).Investing in funds tied to U.S. government securities is not without risk, as both of the iShares funds lost money in January. Yields are on the rise after this week's record borrowing of $32 billion in five-year notes and subsequent debt auctions to fund the stimulus bill, plus President Barack Obama's and Federal Reserve Chairman Ben Bernanke's reminders that more equity infusions to banks are likely to be needed based on stress-test results. Treasury bond prices, which move in the opposite direction of yields, are easing from their flight-to-quality highs in December. The rising yields are required to continue attracting foreign investors who exchange their home currency for U.S. dollars to buy our government securities. The one ETF on our list not based on fixed-income securities is the PowerShares DB US Dollar Index Bullish Fund (UUP). Up 8.32% in the past year, the fund is positioned to benefit from currency conversions from the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc to U.S. dollars.
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