5 ETFs to Buy for Growth in 2012
Bets on leveraged debt and Treasuries were the golden ETFs of 2011 -- here's the funds investors should buy for 2012.

In my last couple of articles, I discussed the growth of the ETF industry and how to determine what types of ETFs are smart investments.

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 were the 10 worst-performing ETFs for the past year:

ETFTicker1-year return (%)
ProShares UltraShort SilverZSL-66.31%
Direxion Daily India Bull 3x SharesINDL-64.22%
PowerShares DB 3x Short
25+ Year Treasury Bond ETN
SBND-63.78%
Market Vectors Solar EnergyKWT-63.46%
iPath Global CarbonGRN-62.47%
C-Tracks Citi Volatility IndexCVOL-62.32%
Direxion Daily China Bull 3xYINN-62.25%
Guggenheim SolarTAN-61.87%
Direxion Daily Emerging Markets
Bull 3x
EDC-61.30%
Global X UraniumURA-57.27%

As you can see, alternative energy and emerging markets didn’t fare too well last year.

And here are the top 10 performers:

ETFTicker1-year return (%)
PowerShares DB 3x Long
25+ Year Treasury Bond ETN
LBND102.71%
Direxion Daily 20+ Year Treasury Bull 3XTMF96.95%
ProShares Ultra 20+ Year Treasury ETFUBT65.71%
Direxion Daily India Bear 3XINDZ58.98%
PIMCO 25+ Year Zero Coupon
U.S. Treasury Index Fund
ZROZ58.74%
Vanguard Extended DurationEDV53.89%
Direxion Daily 7-10 Year Treasury Bull 3XTYD44.49%
iPath U.S. Treasury 10-Year BullDTYL42.25%
iPath Treasury Long BondDLBL42.06%
PowerShares Base Metals Double ShortBOM39.34%

Huge bets on leveraged debt and Treasuries were the golden ETFs of 2011. But as I said in my last article, leveraged ETFs are very risky and should be purchased only by experienced, sophisticated investors who well understand their risks.

However, it’s clear that in a year when most stock market sectors saw negative, or tepid returns, fixed income was the winner. Yet a couple equity sectors outperformed, as shown by the next chart, and represented by various iShares ETFs:

SectorSymbol1-year return (%)
Health CareIXJ8.2%
Consumer StaplesKXI7.3%
EnergyIXC-0.3%
TechnologyIXN-3.7%
TelecommunicationsIXP-4.8%
Consumer DiscretionaryRXI-5.3%
UtilitiesJXI-8.0%
IndustrialEXI-8.9%
Basic MaterialsMXI-18.4%
Financial ServicesIXG-21.4%
Source: SeekingAlpha

Both health care and consumer staples managed to eke out decent returns last year, but it certainly was not a banner year for equities or equity ETFs!

So let’s look ahead and see what 2012 might have in store for us.


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