10 Best-Rated Exchange-Traded Funds

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.

Fixed-Income Securities Lead the Way
Fund (Ticker) Rating
Objective
Total Return 1 Year
iShares Barclays 3-7 Year Treasury Bond Fund (IEI) A+
Government Bond
6.95%
iShares Barclays 10-20 Year Treasury Bond Fund (TLH) A+
Government Bond
8.54%
SPDR Barclays Capital Intermediate Term Treasury ETF (ITE) A+
Government Bond
6.75%
SPDR Barclays Capital Short Term Municipal Bond ETF (SHM) A+
Municipal - National
4.64%
iShares Barclays Government/Credit Bond Fund (GBF) A+
Government Bond
4.17%
iShares Barclays Intermediate Government/Credit Bond Fund (GVI) A+
General Bd - Investment Grade
4.20%
PowerShares DB US Dollar Index Bullish Fund (UUP) A+
Growth - Domestic
8.32%
PowerShares VRDO Tax Free Weekly Portfolio (PVI) A+
Municipal - High Yield
3.16%
iShares Barclays MBS Bond Fund (MBB) A+
General Mortgage
5.86%
Market Vectors - LB AMT-Free Intermediate Municipal ETF (ITM) A+
Municipal - National
4.46%
Source: TheStreet.com Ratings

Source: TheStreet.com Ratings. For an explanation of our ratings, click here.

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.

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