It’s often been said that the top 10 exchange traded funds make up more than 50% of all ETF trading volume. Here are the 10 most actively traded long-only ETFs trading right now.
SDPR S&P 500 (NYSEARCA:SPY). SPY is one of the go-to ETFs for exposure to the broader market. No wonder: the S&P 500 is the index that is most watched by professional traders because the large-cap index is considered one of the broadest measures of the state of the U.S. economy. [Indexes ETF Investors Should Know.]
Financial Select Sector SPDR (NYSEARCA:XLF). XLF holds some of the biggest banks in the country, but they’re under fire these days. Senate Banking Committee Chairman Christopher Dodd is expected to unveil legislation that will be even tougher on the financial industry than President Barack Obama’s original plan. Dodd’s bill will allow the Federal Reserve to examine any bank holding company with assets in excess of $50 billion. Large financial companies that aren’t banks could also fall under scrutiny under the plan. [6 ETFs to Play the Financial Recovery.]
PowerShares QQQ (QQQQ). Technology is leading the way out of the recession. Dr. Ed Yardeni of Yardeni Research says that tech will come out ahead this year and “industry analysts are raising both their 2010 and 2011 estimates as the sector continues to deliver more positive earnings surprises than the other sectors.” The tech sector’s top performers have some things in common, such as companies that have big global footprints and strong, clean balance sheets. Additionally, valuations look attractive, tech companies are continuing to put up record revenue numbers and capital expenditure may begin to increase. [Why Tech ETFs May Keep Leading in 2010.]
iShares MSCI Emerging Markets (NYSEARCA:EEM). The man who coined the term “emerging markets,” Antoine van Agtmael, chief investment officer at Emerging Markets Management, says emerging market shares could waver in a 20% up or down range this year. It won’t be the sell-off of 2008, but it may not be the bonanza seen in 2009. Emerging markets still have value and although the returns may not be what they had been, you can’t fight the trend. [Emerging Market ETFs: A Temporary Pause?]
iShares Russell 2000 Index Fund (NYSEARCA:IWM). On average, small-caps outperform their large-cap brethren for a full three years coming out of a recession, according to Morningstar. Coming off particularly nasty slowdowns, small-caps boast even more endurance. For example, after the 1973-1974 recession, small-caps trounced large-caps for an entire decade, returning an average of 28% per year. Furthermore, the small size of these shares make them nimble and better equipped to withstand an economy’s ups and downs. Small-caps have a historical tendency to outperform because they’re better able to adapt to shifting market conditions. [The Case for Small-Cap ETFs.]
United States Natural Gas (NYSEARCA:UNG). President Barack Obama is unveiling a proposal for coal-burning power plants to switch to natural gas. That’s because natural gas is cleaner, and the United States has got it in spades. Big oil might like the proposal, too, as many companies have made significant investments into natural gas. [Obama's Proposal Could Be a Win for Natural Gas ETFs.]
iShares Dow Jones U.S. Real Estate (NYSEARCA:IYR). At the very least, real estate’s comeback from the lows is impressive. Investors had priced in total financial ruin that never materialized; that’s the good thing. But now the market may have gone too far in the other direction; there are concerns that it has “overshot” and calls for a strong recovery are way too hopeful at this point. Worse yet, if a double-dip recession strikes, real estate stocks could be among the hardest-hit. [Real Estate ETFs: Big Improvements, Big Challenges.]
iShares MSCI Japan (NYSEARCA:EWJ). Joblessness in Japan is dropping and job availability is on the rise. It’s taken as a sign that improving exports and output are fueling the necessary economic growth. But don’t get too excited; analysts still feel that, as in most developed markets, a recovery in Japan will be slow. [3 Things Japan ETF Needs Now.]
iShares FTSE/Xinhua China 25 (NYSEARCA:FXI). The Chinese government also has a vested interest in building and maintaining the country’s infrastructure: when there are roads, runways, electric power, clean water and more, social unrest declines. Meanwhile, the country still struggles with concerns over an asset bubble and is taking steps to mitigate these issues. China’s government warned that China’s asset prices could fluctuate dramatically if global stimulus policies are reduced. [China ETF Plays.]
Energy Select Sector SPDR (NYSEARCA:XLE). Energy is a major component of daily life around the world. If futures-based energy ETFs aren’t for you, perhaps an equities ETF such as this one might be a better bet. Wild price swings in oil, natural gas and gasoline may take awhile to become evident in these funds, making them slightly less volatile. The oil industry is expanding its options into other energy fields as it anticipates the eventual depletion of oil reserves. [How to Harness Energy by Using ETFs.]
Disclosure: Tom Lydon’s clients own shares of UNG and QQQQ.
Max Chen contributed to this article.