With the introduction of Index ETFs the prime reason why traders are more attracted towards these investment instruments is because of the stock like flexibility it provides. Due to its popularity this type of funds not only adds new traders but it also encourages current index mutual fund investors to switch. Since ETFs can be traded on stock exchange during the market hours, investment managers can take index position to capitalize on the situation or limit their risk in bad times.

Some of the most popular Index ETF are:

1.)   iShares Russell Midcap Index (IWR): Investments of these funds are more focused on the mid cap stocks listed on Russell. Top holdings are TJX Companies, Avon Products, Precision Castparts Corp., Marsh & McLennan Companies, H.J. Heinz Company etc.

2.)   iShares Dow Jones Select Dividend Index (DVY): This fund is a perfect match for the investors that like to invest in dividend paying stocks. Top holdings of these funds are Lorillard Inc., Centurytel Inc., Eastman Chemical Company, VF Corporation Entergy Corporation etc.

3.)   iShares S&P 500 Index (IVV): Fund Managers here are focused on investing in good scripts listed on S&P 500. Top Holdings of these funds are ExxonMobile Corporation, Microsoft Corporation, GE, J.P. Morgan Chase, Procter &Gamble Company etc.

May it be Institutional Investors or active hedge fund managers, they all have one thing in common which is they all love Index ETFs. For these investment managers when it comes to increasing their exposure to the broad index or hedge their current positions they go for Index ETF purely because of its convenience.

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If you do believe in low but steady returns you are definitely going to invest your money in bonds, and for the risky investors out there in the current market situation it makes more sense to rather invest in bonds and play safe. Bond Exchange Traded Funds entirely invest in bonds. Bond ETF possess bonds and it works with different strategies like it may invest in U.S. Treasury bonds, High Yield bonds, from short to long term bonds. Like any other ETFs Bond ETF can also be traded like shares on the exchange during the trading session. Further, like International ETFs there are also bonds available which are being established in foreign countries, traders can take advantage of the rate differences by investing in International Bond ETFs.

Below are some of the popular Bond ETFs available in the market today:

1.) iShares Lehman Aggregate Bond (AGG): most financial securities that invest in bonds considers this ETF as a Benchmark. Based on their investment, these funds are deeply invested in short-term US treasury and government securities.

2.) iShares Lehman Intermediate Government/Credit Bond Fund (GVI): These funds are more inclined towards medium range government securities and credit bonds.

3.) SPDR Lehman High Yield Cond ETF (JNK): These funds are more inclined towards long-term but high interest treasury bonds and government securities.

According to some, Bond ETF is the best option for a complete beginner who has never dealt with trading in securities of any kind, and for the traders who understand the market forces should not invest in bonds. However in the current economic situation I would encourage traders to invest in Bond ETF.

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So if there are still worries about the stock market and there is going to be recession in the economy the rational idea is to short the index. However if a trader does not have a margin account and don’t want to have one, ETF Short becomes the right choice. Unlike Mutual Funds one can buy and sell ETFs on the exchange during the trading session just like ordinary stocks.

Usually Short ETFs can be categorized in to following three types:

1.)   Normal Short ETF: In this type of ETFs a trader gets returns equal to the fall in the market i.e. if the market falls by 2% value of this ETF goes up by 2%. Some of the popular Short ETFs are Short S&P 500 ProShares (SH), Short NASDAQ-100 Index (PSQ), Short Dow Jones Industrial Average SM (DOG), and Short Russell 2000 Index (RWM).

2.)   Double Short ETF: In this type of ETFs a trader gets double the returns in case the market falls i.e. if the market falls by 2% then the value of this ETF goes up by 4%.

3.)   Ultra Short ETF: Some of these Ultra Short ETF offers a trader to get 2.5 times the returns if the market falls i.e. if the market falls by 2% value of this ETF will go up by 5%. Some of the popular Ultra Short ETFs are UltraShort NASDAQ-100 Index (QID), UltraShort Dow Jones Industrial Average SM (DXD), UltraShort S&P 500 Index (SDS) and UltraShort Russell 2000 Index (TWM).

Today traders do not need to worry about the falling markets so either you already are invested in the current market and want to hedge your risk by taking an inverse position or if you believe markets are going to fall you can deal in these ETFs and take advantage of the situation.

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Initially when the International ETF was introduced for the traders based in United States they offered Eastern Europe, Latin America and Southeast Asia in the same fund termed as emerging-markets. Now days you can trade on the metal prices on exchanges in India and China, one can play on political ambiguity in Turkey, business located in small but strong economy like Malaysia thanks to ETFs. The instruments offered today gives strength to the investors to invest in any economy in any part of the world, and all the different verities of products.

International ETFs are increasingly becoming popular with the current financial crisis. As performance of U.S. markets is facing the consequences of recession and since it’s not true for other Asian and Emerging markets traders are investing in ETFs that manage their funds in those markets. In the past if the developed countries were in recession it would hurt the emerging market’s performance as well, however today local businesses in emerging markets are so strong that recession in developed economies have little effect. By investing in International ETF traders can hedge their current positions in the local exchanges or they can just square off their local positions and only invest in emerging markets where today there are more opportunities to earn profits.

Depending on the changing market forces and changing conditions of different economies of the world banks and financial institutions offer funds that would help the investors make profits. Some of the popular International ETFs are as follows: iShares MSCI Emerging Markets Index (EEM) - these funds have given great returns if you look at the change in its Net Asset Value. Their Top 5 Holdings include Samsung Electronics Co., Ltd. (GDR), Taiwan Semiconductor Manufacturing ADR, Itau Unibanco Holding S.A. ADR, Petroleo Brasileiro S.A., Petroleo Brasileiro S.A. ADR. Likewise there is iShares Trust FTSE-Xinhua China 25 Index Fund, iShares MSCI Brazil Index Fund, iShares MSCI South Africa Index Fund and many more.

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Several different types of ETF are being offered to ordinary traders. One can keep away from the hassle involved with holding physical commodities or precious metal and can buy Commodity ETFs. Likewise, if one is optimistic about the overall markets they can buy Index ETF and if someone thinks that markets are going to fall then they can buy Index Short ETFs. If the local economy is facing recession then one can invest in the Emerging markets Index ETFs or Currency ETFs of Emerging Markets. One of such products introduced and is very popular amongst traders is Sector ETF; Fund Manager who manages this fund invests money into companies of a particular sector.

If a trader believes that a particular sector is going to perform better based on the current market scenario in the past they used to invest in a particular company which belongs to that sector. Investment of this type becomes risky since you are weighing a huge part of your portfolio into one company. By investing in Sector ETF trader is taking advantage of the whole sector and at the same time staying away from the risk of being heavily invested in a particular company’s stock. With Sector ETF there are sub categories, so there are funds available in the market which invests in companies of a particular sector but based only in one market, there are also some that invest in a particular sector’s companies domiciled locally as well as internationally.

Some of the popular Sector ETF is as follows: Merrill Lynch Retail HOLDERs (RTH): These Funds invest in companies of retail sector based in the United States. Retail HOLDERs is listed with NASDAQ, top 5 holdings of this fund are Wal-mart stores, Home Depot, Target Corporation, Walgreen Company and Amazon.com. Likewise there is Vanguard Information Technology ETF, Select Sector SPDR Fund – Financial, iShares Dow Jones U.S. Telecommunications Index Fund and many more.

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Generally there are two types of Exchange Traded Funds that deal in silver where a trader can invest. First type of ETF is where banks or financial institutions actually hold silver and Second type of ETF is where fund managers invest in the futures and options that track the price of silver. Both the types of ETF will move in the same direction as the current cash price of silver. Silver ETFs become a perfect investment for banks or institutional investors looking for short term gain or who wants to use this commodity fund to hedge their risks from other investments for a while. However, there are a limited number of investors who are looking for long term gains out of this precious metal based on its robust historical data and also because they want to play safe.

Some of the most popular Silver ETFs are as follows:

1.) iShares Silver Trust (SLV): This fund is quite old in comparison to others that offer Exchange Traded Funds in Silver, it is also one of the largest of all. SLV is a fund that holds physical silver and keeps the investors free of the headaches associated with holding precious metals. Today iShare Silver Trust holds silver worth $4.54 billion.

PowerShares DB Silver Fund (DBS): Unlike its counterparts this fund doesn’t hold physical silver but it invests in derivatives that track spot price of silver. Futures and options contracts these fund deal in are based on an index managed and developed by Deutsche Bank.

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One of the most popular indexes in the world and the most traded exchange traded funds on the exchange tracks S&P 500. S&P 500 includes stocks of huge publicly owned companies which are traded on either of the two of the largest stock exchanges of United States; NYSE Euronext and NASDAQ OMX.

This index is better known in comparison to whole bunch of indexes managed by Standard & Poor’s which is part of McGraw-Hill.  So as part of S&P ETF, managers invest in the components of this index such as ExxonMobil, Citigroup and General Electric.

Some of the popular funds based on the S&P ETF are as follows:

1.)    SPDR S&P 500 ETF (SPY): This fund broadly tracks S&P 500 Index and invests in the stocks that are listed with the index and would replicate performance of the whole index. So usually the Net Asset Value of this Fund would walk hand in hand with the value of S&P 500’s value.

2.)    SPDR S&P Emerging Asia Pacific ETF: This fund seeks to strongly replicate the total return of S&P Asia Pacific Emerging BMI Index. This index mainly includes companies that are based in the emerging markets of Asia Pacific.

Profunds Ultra S&P 500 ETF (SSO): Day by day banks and financial institutions are finding new ways to lure traders to invest in their fund. One of those innovation includes the fund we are talking about right now, with this fund traders are offered an opportunity to multiply their returns on their investments. SSO offers double the daily return of the S&P 500, so if a trader is confident about the market and as per his sentiments S&P 500 is going to perform well then with this fund he/she has an option of multiply his gains by the use of margin money facility which is widely available these days.

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Commodity ETF can be of various different types however a largest part of ETFs replicate the gains of commodities with the help of investments in commodity futures markets. A great feature of ETF which many of you might be aware about by now which is they can be traded like stock and also unlike mutual funds they can be bought and sold during the market hours.  Some ETFs only invest in the commodity derivatives, there are some funds that buy the actual commodity where as there are some that buy stocks of companies that deal in that commodity in some or the other ways. Further, there are funds dealing in multiple commodities which can be a hedging instrument or for the traders looking for diversity in their portfolio.

On a broad scale ETFs can be distinguished into following six classes:

1.)    Precious metals
For Example: PowerShares DB Gold Fund ETF (DGL) managed by DB Commodity Services is based on the futures contracts on gold and it tracks overall gold performance.

2.)    Natural Gas
For Example: The main goal of this kind of ETF (UNG) tracks changes in the percentage in the NAV which reflects the price of natural gas.

3.)    Base metals
For Example: PowerShares DB Base Metals Fund (DBB) based on  Optimum Yield Industrial Metals Excess Returns (Index) which includes futures contracts of most liquid and mostly all base metals – aluminum, copper and zinc.

4.)    Oil
For Example: PowerShares DB Oil Fund (DBO) again based on Deutsche Bank and this Index is based on futures contracts on Light Sweet Crude Oil (WTI) and it tracks overall Oil performance.

5.)    Agricultural commodities
For Example: PowerShares DB Agriculture ETF includes future contracts of widely traded commodities relating to agriculture namely corn, wheat, beans, sugar and wheat.

6.)    Other commodity related ETFs: These types of funds invest in multiple commodities as opposed to funds that concentrate on one single commodity.

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Below are some of the different varieties of ETFs available today:

1.)    Actively Managed ETFs: These types of funds are recently introduced in the United States. The very first Actively Managed ETF came into existence in early 2008 however it was liquidated by the end of 2008. All the information about actively managed ETFs are available in the markets, also on funds websites one can find daily updated list of securities in their portfolios.

2.)    Index ETFs: Some of the initial ETFs that came into being were Index ETFs, today most ETFs act as index funds which holds the stocks and try to replicate the act of a stock market index.

For example: iShares S&P 500 index ETF (IVV), iShares Dow Jones US Insur. Index ETF (IAK).

3.)    Commodity ETFs: Commodity ETFs are the funds that hold the actual asset and track the price of the underlying commodity and accordingly this ETF is traded on the exchange based on its Net Asset Value.

For example: Market Vectors Gold Mining ETF (GDX), SPDR Gold ETF (GLD).

4.)    Bond ETFs: They invest in Government treasury bonds, these funds are the best during the time of recession. People who stayed invested in stocks during the financial crisis not only lost their profits but also a part of their invested principle.

For example: iShares iBoxx $ High Yield Corporate Bd (HYG).

5.)    Currency ETFs: There are sub categories in this type of ETFs there are some ETFs which invest in multiple currencies and there are some that invest in a particular currency.

For example: Sterling Money Market ETF (XGBP), US Dollar Money Market ETF (XUSD).

6.)    Hedge Fund ETFs: Exchange Traded Funds over here tracks multiple hedge funds and follow their activities and/or strategies.

For example: Index IQ Hedge Mst ETF (QAI).

Now since you have made the decision of investing in ETF find the one that best suits your requirement and start rolling.

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Said that, if you are a trader and want to invest in gold there are several different ways you can increase your exposure in gold, however it’s also important to find out amongst all the different options which is the best investment basket for you. If a trader is looking at gold he/she can invest directly through bullion or buying a coin, or indirectly through gold exchange-traded funds, shares, certificates or derivatives.

Gold Exchange Traded Funds is a relatively new concept but since its establishment it has gained huge popularity amongst the traders. One of the top reasons for traders’ inclination towards Gold ETF is, why directly invest in gold and then find a buyer to square off your position if there is a fund doing the same and is being traded on the index based on its Net Asset Value (NAV).

photo credit: BullionVault

So if a trader is looking at Gold ETFs there are set of offerings which one needs to look at and find out which perfectly matches his/her investment portfolio based on his/her sentiments and strategies. Following are types of Gold ETFs available:

1.)    Gold ETFs that own Gold Mining Stocks: The model these ETFs follow is they hold stocks of gold mining companies from around the world.

For example :
Market Vectors Gold Mining ETF (GDX)

2.)    Gold ETFs which actually owns Physical Gold.

For example :
SPDR Gold ETF (GLD)
iShares Comex Gold Trust (IAU)

3.)    Gold Short ETFs: These ETFs believe that Gold will be seeing bearish trend and goes short on gold. So if the gold prices go down Gold Short ETFs prices will go up.

For example:
PowerShares DB Gold Short ETN (DGZ)
PowerShares DB Gold Double Short ETN (DZZ)

4.)    Gold ETFs that own Future Contracts: These funds only invest in Gold future contracts so some of the ETFs only tracks the upward movement in future contracts and some track the complete opposite.

For example:
Powershares DB Gold Fund(DGL)
E-Tracs CMCI Gold Total Return ETN(UGB)

Considering your current investments you can choose the Gold Exchange Traded Funds that best matches your portfolio and your strategy.

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