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.)

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