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TheStreet Open House

7 ETFs That Aren't Supposed to Be Beating the S&P 500

NEW YORK (ETF Expert) -- Imagine for a moment that you are not familiar with ticker symbols. Now, let me name seven contenders for your investment dollars -- assets that simultaneously diversify your portfolio as well as increase your risk-adjusted performance.

Ticker Symbols (Imagine That You Are Unfamiliar With Them)
           
          Approx YTD %
           
EDV         19.0%
LTPZ         14.4%
CLY         11.9%
MLN         11.8%
BLV         11.7%
PCY         10.5%
BAB         9.8%
           
SPDR S&P 500 (SPY)       6.5%
           

Cut to the chase, right? What are these magical companies or stock funds that will enhance one's risk-adjusted results?

Longer-Term Bonds Of All Stripes Rallying Better Than Stocks
           
          Approx YTD %
           
Vanguard Extended Duration Treasuries (EDV) 19.0%
PIMCO 15+ Year U.S. TIPS (LTPZ)   14.4%
iShares 10+ Year Credit Bond (CLY)   11.9%
Market Vectors Long Muni Bond (MLN)   11.8%
Vanguard Long-Term Bond (BLV)   11.7%
PowerShares Emerging Market Sovereign (PCY) 10.5%
PowerShares Build America Bond (BAB)   9.8%
           
SPDR S&P 500 (SPY)       6.5%
           

Virtually all economists predicted that interest rates would rise this year. Not surprisingly, many investors relied on the economic punditry, betting against or giving up on investment-grade fixed income. That was a mistake.

On the other hand, some folks did not run with the herd. After all, interest rates had already risen dramatically in 2013 and the news of 2014 Federal Reserve tapering had largely been priced into the bond market. It followed that contrarians believed that bond yields were more likely to fall than rise. (See my January commentary, Against The Herd: Lower Rates, Not Higher Rates, In 2014.)

Of course, yesterday's news may not mean much to those who are looking to put money to work at the current moment. On the other hand, understanding one's missteps can help one avoid similar errors in the future. When there's 100% agreement on a particular outcome, that's typically a red flag.

Investors should also consider just how little they hear about the monumental performance of longer-term bonds relative to stocks. Does CNBC do you a service or disservice with its endless chatter about Dow 17000 or the daily all-time records set by the S&P 500?

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