Bond Funds Dominate Top-Rated ETFs

Though stocks are getting a bounce, exchange traded funds that focus on fixed income are garnering top grades from TheSteet.com Ratings.

Super-safe Treasury and municipal bond funds, especially those with short maturities, dominate the roster of the best-rated ETFs. The list below contains the ETFs with the highest overall marks from TheStreet.com Ratings.

With hundreds of performance and risk measures available, identifying worthwhile investments can be a daunting task. TheStreet.com Ratings' quantitative model condenses all available fund data into a single composite opinion of risk-adjusted performance. There are also "reward" and "risk" grades. While there is no guarantee of future performance, TheStreet.com Ratings' grades provide a solid framework for making informed investment decisions.

The grades can be interpreted as follows: A is "excellent" or "buy." B is "good" or "buy." C is "fair" or "hold." D is "weak" or "sell." And E is "very weak" or "sell." A plus or minus sign designates that a fund is in the top or bottom third of funds with the same letter grade.

The column of "Performance Ratings" in the accompanying table is based on a computerized evaluation of a fund's performance for a number of time periods, up to three years. More weight if given in the calculations to more recent time periods.

In determining TheStreet.com Ratings' "risk" grades, the model evaluates volatility measures. In addition to standard deviation of returns, the evaluation process includes a metric known as "drawdown," which gauges a fund's most severe period of loss over a period of time.

Because all funds carry some degree of risk, none receive "risk" grades in the A range. Rarely will a fund be awarded a very high "performance" rating and, at the same time, a very high "risk" rating. Those in the adjoining list that have earned the highest "overall" investment ratings have attained an optimal combination of both primary components. But investors should be aware that a tradeoff always exists between risk and reward.

 
Best-Rated Exchange Traded Funds by TheStreet.com Ratings
NAME
TICKER
Reward Grade
Risk Grade
Overall Grade
3-Month Total Ret'n (%)
Market Vectors Short Muni
SMB
A
B+
A+
3.30
SPDR Lehman Short Tr Muni
SHM
A
B+
A+
2.39
iShares Barclays 3-7 Year Treasury
IEI
A
B+
A+
-0.64
PowerShares DB US Dollar Bullish Fd
UUP
A+
B+
A+
1.07
iShares Barclays 10-20 Yr Treasury
TLH
A+
B+
A+
-1.16
SPDR Lehman Intermediate Tr Treas
ITE
A
B+
A+
-0.03
PowerShares VRDO Tax-Free Weekly
PVI
A
B+
A+
0.35
iShares Barclays 1-3Yr Treasury Bd
SHY
A
B+
A+
-0.08
iShares Barclays MBS Bond Fd
MBB
A
B
A+
1.70
iShares Barclays Intrm Govt/Crdt Bd
GVI
A
B+
A+
1.05
iShares Barclays Short Treasury Bd
SHV
A-
B+
A+
-0.04
iShares Barclays Govt/Credit Bd
GBF
A-
B+
A+
0.08
Morgan Stanley Ins CA Muni Sec
ICS
A-
B+
A+
1.97
Claymore US Cp Mkt Micro Trm Fx Inc
ULQ
A-
B+
A+
0.85
iShares Barclays 7-10Yr Treasury Bd
IEF
A+
B
A+
-0.20
SPDR Lehman 1-3 Month T-Bill ETF
BIL
A-
B+
A+
0.12
Market Vectors Interm Muni
ITM
A
B
A+
7.17
iShares Barclays Aggregate Bd
AGG
A
B
A+
2.47
Nuveen NY Select Tax-Free Inc Port
NXN
A
B
A+
10.96
iShares Barclays 1-3 Year Credit Bd
CSJ
A-
B+
A+
1.00
SPDR Lehman Aggregate Bond ETF
LAG
A
B
A+
-0.72
iShares S&P National Municipal Bond
MUB
A
B
A+
5.44
Neuberger Berman CA Inter Muni Fund
NBW
A-
B
A+
22.68
Vanguard Short Term Bond ETF
BSV
A
B
A+
0.51
SPDR Lehman Municipal Bond ETF
TFI
A
B
A+
6.47
Source: TheStreet.com Ratings (Data as of end of most recent month).

For an explanation of our ratings, click here.

Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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