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The Chicago Board Options Exchange Volatility Index spiked to a new high on Thursday of 81.17. The rise in the VIX -- which serves as a benchmark measure of the implied volatility of
options -- signals not just extreme bearishness but also massive uncertainty in the market.
In this environment, TheStreet.com Ratings' top 10 rated exchange-traded funds steer investors toward the relative safety of the bond market and favor inverse stock funds. All these funds are rated A+, and each of the returns cited below reflect the one-year period ending Sept. 30.
Top 10 Rated ETFs
iShares Lehman 3-7 Year Treasury Bond Fund
returned 9.86% for the year. The fund tracks the Lehman Brothers 3-7 Year U.S. Treasury Index of intermediate term U.S. government bonds.
iShares Lehman 1-3 Year Treasury Bond Fund
earned 6.40% for the one-year period linked to the corresponding Lehman 1-3 Year Treasury Index.
3. With higher risk and return, the
iShares Lehman 10-20 Year Treasury Bond Fund
showed more volatility than the above funds in its tracking of the Lehman 10-20 Year Treasury Index but beat them both with a return of 10.29%.
SPDR Lehman Intermediate Term Treasury ETF
comes in fourth place, returning 8.24%. It gauges the movements of price and accumulated yield of the Lehman Intermediate US Treasury Index.
iShares Lehman MBS Fixed-Rate Bond Fund
made the list with a 6.55% return, holding the same types of mortgage-backed securities from
that have been at the center of the financial storm.
iShares Lehman Short Treasury Bond Fund
added just 3.41% over the same 12-month period but did so with very little volatility. This fund tracks the Lehman Brothers Short U.S. Treasury Index.
Short S&P SmallCap 600 ProShares
is inversely related to the S&P Small Cap 600 Index. Topping all other ETFs on the list, this fund pulled in 13.21% as it bet against companies like
Piedmont Natural Gas
8. While it is not possible for an ETF to own every single U.S. bond in existence, the
Vanguard Total Bond Market ETF
ended the period up 4.57% tracking the Lehman Brothers Aggregate Bond Index. It's modeled to approximate the performance of a wide variety of U.S. fixed-income securities.
9. The second inverse, or short, stock ETF to make the list is the
Short Russell2000 ProShares
. It appreciated 12.43% as the 1,960 members of the Russell 2000 Index fell. The aggregate price-to-earnings ratio of this index is currently negative as the accumulated losses from these companies outweigh the earnings. Some of the higher-priced stocks in the index are
Vanguard Short Term Bond ETF
inched up 5.41% on investments tracking the Lehman Brothers 1-5 Year Government/Credit Index of government, U.S. corporate and investment grade international debt with maturities of five years of less.
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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.