5 ETFs for 2012

In my last couple of articles, I discussed the growth of the ETF industry, ETFs: Love 'Em or Leave 'Em? | InvestorPlace, how to determine which are the best ETFs to invest in, ETFs: Separating the Good from the Bad | InvestorPlace.

Now, it’s time to figure out which ETFs look promising for your 2012 investment dollars. But first, let’s take a look back at the ETF marketplace in 2011.

According to Morningstar.com, here are the top 10 worst-performing ETFs for the past year:

ETF	Symbol	1-yr. Return (%)
ProShares UltraShort Silver	ZSL	-66.31
Direxion Daily India Bull 3x Shares	INDL	-64.22
PowerShares DB 3x Sht 25	SBND	-63.78
Market Vectors Solar Energy	KWT	-63.46
iPath Global Carbon	GRN	-62.47
C-Tracks Citi Volatility Index	CVOL	-62.32
Direxion Daily China Bull 3x	YINN	-62.25
Guggenheim Solar	TAN	-61.87
Direxion Daily Emrg Mkts Bull 3x	EDC	-61.30
Global X Uranium	URA	-57.27

ETFs: Separating the Good from the Bad

In my last article, ETFs: Love 'Em or Leave 'Em? | InvestorPlace, I discussed exchange-traded funds (ETFs), their pros and cons, and the most important characteristics that investors need to know before choosing from the 1,400+ ETFs now on the market.

Many investors frequently make the mistake of chasing returns and blindly select ETFs that have the highest short-term gains. That’s a big mistake!

Unfortunately, the ETF world has caught up with the equity marketplace, with investors abandoning a long-term outlook, and instead jumping on the next “hot” idea. This has led to the proliferation of a variety of ETFs, many that are thirstily sucking up investors’ hard-earned money. But on the bright side, innovation in the ETF space has also meant that investors now have a broad choice of different ETFs to select from. The key is—as with any investment—separating the good from the bad.

Let’s first take a look at the different types of ETFs available to you today, beginning with those that are weighted by alternative parameters:

ETFs: Love ‘em or Leave ‘em?

The first exchange-traded funds (ETFs) came into being in 1993 with the creation of S&P Depository Receipts Trust Series 1, or “SPDR”—an ETF whose mission was to replicate the risk and returns of the S&P 500 Index.

Similar to mutual funds, ETFs allow investors to “pool” their money to invest in a variety of stocks, bonds, commodities, and even currencies.

And although I am a rabid individual stock fan, I have also made room in my personal retirement portfolio for a variety of exchange-traded funds, to strengthen my diversification. In fact, about ten or so years ago, I pretty much eliminated mutual funds from my holdings, because ETFs have several distinct advantages over funds:

Qatar MSCI Upgrade Delayed until June

A  couple of weeks ago, I told you that Index compiler MSCI Inc. was considering an upgrade from frontier to emerging market status for the stock markets of Qatar and the United Arab Emirates.

They have delayed that decision until June, 2012, so investors will need to keep those markets on the back burner for now.

I'll keep you posted!

5 Ways to Protect your Portfolio from Wall Street’s Excesses

For the past couple of days, I’ve written about some of the Wall Street shenanigans such as the greed that drove MF Global into bankruptcy A Lesson About Greed From MF Global | InvestorPlace and rogue traders who lose billions for their firms Rogue Traders: Not as Rare as You Think | InvestorPlace. These are just a couple of the tricks in Wall Street’s bag that result in costly scandals that rock investment markets, wreaking havoc on investors like you and me.

But there are ways that investors can protect themselves. The excesses of MF Global and rogue traders come from proprietary trading that puts the firm’s interests before its customers. This is the crux of the problem with MF Global. But not only did they risk their own company funds, but they seem to have misplaced $1.2 billion in client funds—suspected to have been traded on the company’s behalf.

And this is precisely how rogue traders get their power. They are authorized to trade, mostly, for their companies, and often have the ability to trade millions of dollars worth of investments in one transaction—with little oversight. As you can see from my report yesterday, when they come down on the wrong side of the transaction, even billions of dollars can be lost, leading to company failures and massive investor losses.

Another tactic that puts the screws to their own investors is when the brokerage firm’s proprietary trading desks trade opposite of what the company’s agents are recommending to their clients. Goldman Sachs was charged by the SEC during the recent financial crisis for selling subprime mortgages to its clients at the same time it was allowing those investments to be chosen by client John Paulson, who was shorting them. And just two weeks ago, it was reported that at the same time Goldman upgraded European investments, their trading desk was selling them!

Rogue Traders: Not as Rare as you Think

Yesterday, I began a series of articles, highlighting some of the most heinous Wall Street shenanigans that affect investor’s pocketbooks. My first topic was the recent failure of MF Global and how over-leverage of businesses can have far-reaching effects—on both corporations and their investors.

Today, let’s turn our eyes to rogue trading—a long-accepted Wall Street practice (as long as the profits are piling up!).

According to Wikipedia, a rogue trader “is an authorized employee making unauthorized trades on behalf of his employer”. At least, this is what manager’s call them when they lose scads of company money. But what most investors don’t realize is that this practice is pervasive, can go on for years, and instead of being punished for it, when these “rogues” make their employers tons of money, they are wined and dined, patted on the back and paid mega-bonuses.

We only hear about them though, when their big bets go awry, such as:

MF Global—A Symptom of Wall Street’s—and Main Street’s—Chronic Disease

The disease has a name, and even a cure, but the pain that accompanies its treatment is usually enough to scare off even the most intrepid caregivers.

The disease is greed and its symptoms are many, including over-leverage, rogue traders, and out-and-out fraud. The end result is the same: Greed leads to a scandal and folks lose their hard-earned money, and that scandal erodes investor confidence around the world. And when confidence declines, people feel uncertain and afraid, and park their money on the sidelines. And that hurts everyone.

In the next few columns, I’m going to address a few of these investor hazards, and then give you some tips on how to protect yourself from some of these Wall Street shenanigans.

Let’s start with leverage. It’s an age-old tune, sung by consumers, businesses and investors, who tout its primary advantage—utilizing debt to multiply your money.