Top Seven ETFs from Last Week - DRN, TYH, EDC, FAZ, ICF, RSX, SEA

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there (check out this full ETF List of 787 and counting - every exchange traded fund I could find) and give investors some new investing/diversification ideas. Last week, Real Estate, Tech and Emerging Markets led the way in an overall up week for equities. I made sure to include both conventional and leveraged ETFs in this week's hot list:

Hot List Leveraged ETFs

DRN - Direxion Daily Real Estate 3x - Up 19% - This 3X Return Real Estate Fund was the hottest ETF from last week, up an astounding 19% after a 13% return the prior week. DRN is 107% since launching in July. While this sounds appealing, note that ETFs tend to launch when their underlying sectors are hot. Real estate is just emerging from a near-collapse in the US and is rallying now. The way these leveraged ETFs work, on the upside, due to daily balancing, they can actually exceed a 3X total return over a brief period of time, if the run is virtually uninterrupted (which this one isn't - DRN is actually down 20% from its peak in September). However, over a long period of time, as a trend reverses (as they ultimately all do), the 3X daily return funds do not return anything near 3 times the underlying index due to daily rebalancing. In fact, over long periods of time, they often lose as much or MORE value than the underlying sector, even during a net positive upswing. I always caution investors to understand the risks and dynamics of these poorly understood ETFs before trading (I don't use the word "investing" with 3X ETFs - see why?).

TYH - Direxion Daily Technology Bull 3X Shares - Up 10% - This 3X Tech ETF has been a stalwart member of the hottest ETFs updates, as Tech has outperformed most other sectors in US equities. With productivity through the roof and companies coming out of this recession leaner than ever while remaining employees doing everything they can to avoid a layoff, what corporations are spending money on however, is technology to further boost productivity and allow them to remain lean on the payroll expense given the uncertainty of the return of the consumer. Year to date, the Nasdaq is up 37% vs. an 21% gain for the S&P500 and this ETF is now up 197% on the year and 364% since the March lows. The top 3 underlying holdings are Apple (AAPL), Cisco (CSCO) and Google (GOOG).

EDC - Direxion 3X Emerging Markets - Up 10% - With equities rallying globally and the higher Beta that the emerging market bourses carry (full emerging markets ETF list here), not only did they take it on the chin last year on the way down, but during the recovery, they are rocketing back up at a much faster pace than US equities. EDC is up almost 10X the S&P500 during the 2009 YTD period at 193% vs. 21% for the S&P500.

FAZ - Direxion Daily Financial Bear 3X Shares - Up 7% - You can always count on having either FAS (triple long) or FAZ (triple short) Financials on the list given the volatility in the Financial sector and the constant news cycle regarding either more government oversight, more leadership turnover, TARP paybacks and more. In the near term, it's conceivable that Financials just continue to run. After all, it's looking as though they'll be borrowing at zero and lending for much more for at least another year and the comps from the year prior will continue to look stellar. Overlay these basics with a continued weak dollar trend, which bodes well for all companies deriving a decent portion of income from overseas which many in the index do and it's a perfect storm - of upward share movement; prone to major corrections at any time though. Caveat Emptor.

Hot List - Sector ETFs (no leverage)

ICF - iShares Cohen & Steers Realty - Up 7% -Seeing as how DRN was on the top of the list for leveraged returns, it comes as no surprise that the top rated non-leveraged ETF was also a real estate fund. Coming off the March lows, ICF is up 102% vs. the also astounding 60% return for the S&P500. If you're looking to play the real estate rebound in a non-leveraged fashion, ICF is a decent proxy. VNQ (Vanguard) also performed well on the week at up 6% and has a lower expense ratio.

RSX - Market Vectors Russia ETF - Up 6% - Russia been on a tear, up 160% since the March lows. Viewed as on the verge of default in early 2009, with oil stabilizing over $70 per barrel along with the global economy recovering, markets have viewed Russia's near-collapse in equities as overdone and investors have been buying back in in force. The ruble has recovered against the US dollar indicating the worst may be over from a devaluation standpoint.

SEA - Claymore/Delta Global Shipping - Up 6% - With a steady runup last week totaling 6%, this shipping ETF hasn't been keeping up with the S&P500 over the prior 3 and 6 month periods. However, shippers are notorious for throwing off high yields given the nature of their business. As such, the yield on SEA currently stands at 4%. If you're in it for yield and are thinking perhaps the markets move sideways for a bit, consider high yield municipal bond ETFs which are also tax-exempt from dividends, or high yield corporate bonds.