In Search Of a Safe Haven Among ETFs

Throughout the year, investors have been looking for places to hide; that is, they've wanted a relative safe haven with profit potential.

At different times, there have been a number of places that fit the "safe growth" bill. Vanguard Information Technology (VGT) carried the torch in the summertime. Yet November punished "tech" as much as any popular sector.

Another contender is/was the iShares S&P Global Telecommunications Fund (IXP). Combine the perceived safety of "higher-than-the-market" dividends with infrastructure growth worldwide, and IXP has notched 24% YTD. Yet even here, the 3 corrections of 2007 took their toll... and IXP would likely have struggled to avoid a bearish downtrend.

In truth, the super-strong safe harbors have been on my buy list for more than 9 months. Specifically, I've acquired plenty of shares of the Global Consumer Staples Fund (KXI) and the Dow Jones Commodity Index ETN (DJP). You can read my earlier post on KXI here as well as one on DJP here.

On the other side of the risk scale, others have fallen in love with emerging markets. And why not? It's awfully difficult to argue against 33% YTD gains from the iShares Emerging Market Index (EEM).

However, there does seem to be a growing concern in the investment community that a "China" bubble is not far away. And this has left many to wonder... is there a safer port in the emerging markets? Is there something with the upside of those "BRIC" countries (i.e., Brazil, Russia, India and China.), but less volatile on the downside?

I wondered if the SPDR S&P Emerging Europe (GUR) might sidestep some of the "lookout-below" fears. As far as growth, Eastern/Central European countries have been thriving.

Indeed, there's been a lot of interest in emerging areas of Eastern and Central Europe, including Austria, the Czech Republic and Hungary. So how has GUR performed?

As far as a near-term uptrend, GUR is hitting new highs. And it has been catching up to the broader EEM.

The main problem, however, is the lack of diversification. Nearly 50% of GUR is an energy play... and 25% from one Russian company, Gazprom.

What's more, 60% of the fund is allocated to Russia. With that being the case, what's the compelling reason to choose SPDR S&P Emerging Europe (GUR)over the infinitely more popular, Market Vectors Russia ETF (RSX)?

The bottom line? If you're comfortable with riding the crude oil express, you can use a number of resource-rich countries from Russia to Canada. Just don't get caught thinking that you are diversified internationally if you own Russia, Eastern/Central Europe and Canada. You own a whole lotta energy.