Bull in a Bear Market

Dion believes U.S. equity-backed ETFs will pay off in the short term in this market.
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NEW YORK (TheStreet) -- It's not always easy being a bull in bear country, but I still think that equity-based ETFs will pay off for investors in the short term.

And I'd like to make the case that many U.S. equity-backed ETFs are perfect stepping stones for bear-at-heart investors who don't want to miss out on a bullish rally.

The first step is that you have to admit that the market is rallying. This one is the easiest. For the one-year period ended April 6, 2010, State Street's

SPDR S&P 500 ETF

(SPY) - Get Report

rallied 44.6%. (The statistics represent one-year period trailing total returns from Morningstar).

During the same period, the

PowerShares QQQ

(QQQQ)

and

SPDR Dow Jones Industrial Average

(DIA) - Get Report

ETFs rallied 51.6% and 41% respectively.

While the times may have changed, the fundamental strengths of many broad-based index ETFs have not -- and there's still plenty of compelling reasons why ETFs like QQQQ are solid, long-term picks.

Shortly after I began contributing to

TheStreet.com

last June, I wrote an

article

that laid out the fundamental, long-term reasons for owning this Nasdaq-100 tracking fund.

Nearly a year later, I still have my eyes on the horizon, and I still think that QQQQ is a compelling tool for investors looking to "get on the highway" and gain exposure to a tech-heavy broad-market index fund.

While ongoing debt concerns across the globe as well as the fast approaching reality of financial reform will continue to result in shake-downs throughout the financial marketplace, investors can't afford to continue missing out on a recovering economy.

Individual firms may still fall victim to mistakes in a reckless era, and the pride and folly of CEOs. It will always be advantageous to spot these firms at a distance and be among the handful who profit.

Gaining exposure to the U.S. equity market through a fund like QQQQ, however, is neither costly nor difficult. With an expense cap of 0.20% and an average daily trading volume of nearly 100 million shares, QQQQ is a one stop-shop for investors who want to concentrate on other short-term trading plays while gaining longer-term exposure to the largest Nasdaq firms.

I'm not out to change the minds of the bears out there, but I will continue to make an argument for a well balanced, diversified portfolio. And well balanced doesn't mean owning five different commodity funds.

ETFs are great tools for investors who want to gain exposure to a theme or methodology that isn't their specialty. Their transparency and low cost structure makes them easy to buy, easy to sell and easy to track.

Even if you're still a bear, I hope that the entire market experience, from the downturn in 2008 to the upturn in 2010, has convinced you that diversification is key. The second that you put all your eggs in one basket, things tend to get scrambled.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion was long PowerShares QQQ and SPDR Dow Jones Industrial Average.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.