Five ETFs Experts Say to Avoid in 2011

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 |  Includes: AMLP, TRND, UNG, VXX, VXZ
by: Ron Rowland

Every year when the calendar rolls over, investment publications like to run stories about stock and fund picks for the coming year. Investor’s Business Daily took a different approach in a January 18 article entitled Five ETFs That Strategists Say Should Be Avoided.

I was one of the strategists that IBD’s ETF reporter, Trang Ho, interviewed for this story. It should come as no surprise to regular readers that my choice for ETF to avoid was the Alerian MLP ETF (NYSEARCA:AMLP).

I have written unfavorably about AMLP many times in the past, trying to warn investors about AMLP’s Dirty Little Secret. In the IBD article, I point out that of the more than 1,100 ETFs and ETNs on the market today, AMLP is the only one organized as a C-corporation, making it the only one reducing shareholder gains by about 35% to pay corporate taxes.

Four other funds were labeled in the article as investments to avoid. Matt Hougan recommends against owning iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) and VIX Mid-Term Futures ETN (NYSEARCA:VXZ), Michael Johnston says to avoid RBS U.S. Large Cap Trendpilot ETN (NYSEARCA:TRND), and Sam Subramanian doesn’t think investors should purchase United States Natural Gas Fund (NYSEARCA:UNG).

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.