2010 has been a wild ride for the market and has left investors unsure of what to expect next. So, when it comes to outperforming ETFs for the year, it should come as no surprise that there were several, well, surprises. Over 2010, commodities regained some of their swagger and retail sales picked up momentum, and this movement was reflected in the list of top performers. Here are four of the best-performing non-leveraged and non-inverse ETFs this year. (Check out some of the new ETFs that have emerged recently in 5 New ETFs You've Never Heard Of.)

IN PICTURES: 10 Reasons To Add ETFs To Your Portfolio

Poor Man's Gold
With a year-to-date return of 71%, the iShares Silver Trust (NYSE:SLV) has been one of the lead dogs among ETFs for much of the year. This fund has benefited from silver reaching a multiyear high this year and closing the gap between gold and silver prices. The price of silver recently reached $30.70 an ounce, a level that has not been seen in 30 years.
As long as uncertainty continues to loom about the health of the U.S. economy, precious metals should be able to hold their ground. I am not sure how much upside silver has after such a gigantic run-up in price this year, but it is less of a betting chip than gold and is more commonly used for industrial purposes.

As one might expect, some of the same factors that helped push SLV up the charts have also played a role in the 30.2% return of the Market Vectors Gold ETF (NYSE:GDX). Gold prices are up close to 25% this year and the metal is on pace for its 10th consecutive year of appreciation. At a price of close to $1,400 per ounce, gold mining has been a good business to be in. (Find out more about investing in precious metals in Precious Metals Funds: A Golden Opportunity? and A Beginner's Guide To Precious Metals.)

The Consumer Is Reborn
A strong charge this fall by the SPDR S&P Retail ETF (NYSE:XRT) contributed to the ETF's 34.7% return on the year. This showing comes on the heels of a monster 2009 in which XRT submitted an 87.6% performance.

The surge in this ETF can be attributed to a gradual increase in consumer spending over recent months. A Bloomberg News survey showed that household spending increased by 0.4% in October and another 0.5% in November. A formidable showing by retailers on Black Friday also has the potential to keep this ETF firing on all cylinders as we head into 2011.

Switching back to the commodities space, the SPDR S&P Oil & Gas Equipment & Services ETF (NYSE:XES) has turned in a 26.2% gain this year. The fund has benefited from rising oil prices as well as an end to the moratorium on drilling in the Gulf of Mexico earlier this quarter. Declining inventories and increasing activity at refineries should keep this ETF on an upward path as we flip the calendar.

The Bottom Line
Precious metals were a dominant force in the ETF arena in 2010 as investors hedged against inflation and participated in a flight to safety. Managed expectations set the stage for retail companies to overachieve as consumers began to dig a little bit deeper into their wallets. The challenge now is for investors to determine which ETFs will jump to the front of the pack in 2011. (For related reading about ETFs, see Introduction To Exchange-Traded Funds and How To Use ETFs In Your Portfolio.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    Top 3 Japanese Bond ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and corporate bonds issued by developed countries, including Japan.
  2. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Savings

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Investing Basics

    6 Reasons Hedge Funds Underperform

    Understand the hedge fund industry and why it has grown exponentially since 1995. Learn about the top six reasons why the industry underperforms.
  6. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  7. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  8. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  9. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  10. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!