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By Carolyn Dion
NEW YORK (
) -Instead of focusing on a single fund during a single trading session, I'm kicking off the first trading day of 2011 with five ETF plays for the year ahead.
1. PowerShares DB Base Metals
Base metals are the final frontier for ETF investors, who have readily embraced an expanding line of physically backed precious metals in the past. While several firms -- including
and ETF Securities -- have filed to launch base and industrial metals, DBB is the only U.S. ETF that currently offers exposure to a basket of base metal funds.
Base metals trailed their precious metal counterparts in 2010, but an improving global economy, an increase in construction, growing demand in emerging markets and a raft of upcoming funds will help to draw plenty of attention to this group in the year ahead.
DBB tracks a basket of commodities contracts that is comprised of one-third copper, one-third aluminum and one-third zinc. By mitigating some of the single-commodity specific risk, DBB is a good pick for investors who understand the fund's underlying construction and are able to monitor their positions on a somewhat-active basis.
Depending on the timing of new base metal fund launches, some of the upcoming funds may prove to be more attractive. If this is the case, investors may consider shifting assets when the time comes.
Market Vectors Agribusiness ETF
Several key natural disasters and meteorological events will keep investor interest pinned to rising food prices in 2011. Whether it was the fires in Russia, floods in Pakistan or recent cold snap in key U.S. growing states like Florida, crops across the globe were impacted in 2010, and the pressure is on to meet the needs of a growing global population in 2011.
MOO's underlying components -- which include fertilizer giants like
along with equipment providers like
-- will see an increase in demand in the year ahead as farmers set to make up for lost crops, look to profit from the elevated commodity prices and seek to meet growing demand from emerging markets. MOO is a well-balanced, highly-liquid pick.
iShares Barclays TIPS Bond ETF
While many measures of inflation are at record lows, expect to see a new wave of inflation concern in the year ahead. The
's pledge to keep rates a rock-bottom levels has remained solid, but there is growing concerns amongst economists -- and the Fed committee itself -- as to how sustainable this policy will be over the long term.
Fed intervention has managed to keep inflation concerns at bay, but it still makes sense to build in some protection for the year ahead. Government spending continues to be high and investors shouldn't count out further stimulus in the months ahead. Inflation fear can spread fast, and TIP will be a good fund for protection during 2011.
First Trust Dow Jones Internet Index
U.S. consumers are entering a new age of the Internet in which connectivity is constant and an array of new products provide ways for individuals to maximize the content available on the web. The continued growth of products like smartphones and the iPad will only help to increase internet use in the year ahead, while products like
TV will revolutionize the way consumers interact with traditional media.
FDN tracks many of the Internet's top firms, tracking a portfolio that highlights search engine giants like
along with other strong picks like Amazon,
. Consumers will continue to turn to the Internet for an increasing number of services in 2011 and FDN should continue to benefit as a result.
iShares Dow Jones Select Dividend Index
Yield was an incredibly popular theme in the ETF industry during 2010, and it promises to contiue to be a hot topic in 2011. As more and more investors cautiously re-enter the marketplace, funds like DVY will hold appeal for those that are looking for reliable pay-outs and traditional equity ETF structure.
DVY tracks a portfolio that includes a well-balanced mix of well-known dividend-paying stocks like
By employing a methodology that eliminates riskier dividend-payers (and REITs altogether), DVY's structure mitigates some of the risks associated with investing in high-yield equities.
At the time of publication, Dion Money Management was long First Trust Dow Jones Internet Index, iShares Barclays TIPS Bond ETF and iShares Dow Jones Select Dividend Index.
Carolyn Dion is an analyst and associate editor for the Fidelity Independent Adviser family of newsletters, Dion Money Management's affiliate newsletter company. A former ETF specialist and NYSEArca lead market maker, Dion provides analysis on the exchange-traded product industry.
In addition to her role as analyst and editor, Carolyn is vice president of Dion Money Management, a fee-based investment advisory firm, where she assists in the development of ETF strategies. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages more than $530 million in assets for clients in 49 states and 11 countries.