The Top 10 Performing ETFs of 2011 So Far

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Includes: BAL, EDZ, ERX, ETN, KWT, NIB, TAN, UDOW, UMDD, USD
by: Investment Underground

By Scott A. Mathews

Can you guess the top 10 best performing ETFs and ETNs of this year? These outperformers had a few things in common with this year's rally: These funds were long, and sometimes leveraged long, and have had a relatively smooth ride since the summer of 2010. We also determined that some of the funds offer low expense ratios to investors and uncomplicated share class structures. We do warn investors that many of these names are volatile and most took a hit in last Tuesday's sell-off. Here are the top 10 performers of 2011:

Direxion Daily Energy Bull 3X Shares (NYSEARCA:ERX) Surfing the oil wave, ERX has delivered 46% year-to-date and one can guess that so long as Middle East turmoil remains in the headlines, oil prices will remain high. The ETF has a .98% expense ratio. For our recent list of 6 energy companies with undervalued natural gas reserves, click here.

iPath DJ-UBS Cotton TR Sub-Index ETN (NYSEARCA:BAL) This ETN has generated a spectacular 31.5% return year-to-date, continuing a 12 months tear of just over 150% return to investors. It invests in “the fabric of our lives” and has a .75% expense ratio. It did just experience a down week so stay tuned to see if it has already hit its final apex.

Market Vectors Solar Energy ETF (NYSEARCA:KWT) This ETF tied to the solar space has a dividend of .5% that helps offset its .65% expenses ratio. Most notably, it has started 2011 off with a bang by dramatically accelerating returns with a 21% return year-to-date.

iPath DJ-UBS Cocoa TR Sub-Index ETN (NYSEARCA:NIB) Riding the cocoa wave, this ETN has garnered returns just over 20% year-to-date and holds its expenses ratio at .75%. Some political rumblings in Cote d’Ivoire, a leading producer of the commodity, have given it a sharp push recently. Stay tuned to see how this develops.

ProShares UltraPro Dow30 (NYSEARCA:UDOW) Increasing NAV by 18.2% year-to-date as a part of a 12 month NAV growth of 61% this ETF maintains an expenses ration of .95%. It is a large-cap blend and holds a leverage 2.3x assets in DJIA swaps. Some of the large caps in UDOW were also part of the 8 inflation-proof blue chip we identified last week.

iPath DJ-UBS Tin TR Sub-Index (NYSE:ETN) Betting on tin has given this ETN a trailing 12-month return of nearly 90% and this year has been a continuation of the trend—18.1% year to date. It has an expenses ratio of .75%. It was not immune from the correction, however, and has edged off its high.

ProShares UltraPro MidCap400 (NYSEARCA:UMDD) Also on a steady run, UMDD has delivered just over 17% to investors in 2011. This maintains the strong 12-month performance of 96%. Investing across the mid-cap space, it has an expenses ratio of .95%.

ProShares UltraPro Semiconductors (NYSEARCA:USD) A more than respectable 16.3% growth in NAV is how USD has rung in the new year. With an expenses ratio of .95, USD has leveraged 1.7xs its assets in its Top 5 Holdings: Djussc Swaps, Intel (NASDAQ:INTC), Texas Instrument (NYSE:TXN), Broadcom (BRCM) and Applied Materials (NASDAQ:AMAT). We identified Intel as a dividend king of 2011.

Guggenheim Solar ETF (NYSEARCA:TAN) A history of sharp peaks and valleys over the past 12 months hasn’t stopped this narrowly focused ETF from performing in 2011. This year it has returned 16% betting on the global solar market. It has an expense ratio of .65% and also pays out a .34% dividend.

Direxion Daily Emerging Markets Bear 3X Shares (NYSEARCA:EDZ) This market pessimist has returned 15.6% year-to-date and maintains an expense ratio of 1.1%. With commodities prices on the rise, they may find a new supply of names that fit with their bearish thesis. Pay attention to the leverage on this fund as it adds risk and doesn’t provide for tax efficiencies.

We’ve also been keeping track of volatility via the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX), which has been spiking over the past two days. See what we think is going to happen next here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.