As important economic news (such as gold hitting $1,400 per ounce and the depreciating US dollar) rocked the headlines in 2010, its important to think about how these developments affected your investments. Let's take a look at how a couple of major indexes and index funds have performed since the beginning of the year to determine just how well these ETFs performed.
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|Focus||ETF||Year to Date|
|U.S. Dollar||PowerShares DB US Dollar Index Bullish
|U.S. Equity||SPDRS S&P 500 Index
|Europe, Australia-Asia||iShares MSCI EAFE Index
|Energy||United States Oil
|Precious Metals||iShares Comex Gold Trust
|Fixed Income||iShares Barclays 7-10 Year Treasury (NYSE:IEF)||+5.88%|
|Frontier Markets||Market Vectors Africa ETF
The S&P 500 index, as tracked by the SPDRS S&P 500 Index fund, has fluctuated over the year; however, this fund did start to rise as the year was winding down. In the final quarter of 2010, the S&P 500 (as well as the DJIA) has seen a move of around 20% . (For a complete guide, check out our Index Investing Tutorial.)
Pullbacks and Producers
Gold futures prices, followed by the iShares Comex Gold Trust fund, have continued to trade at record highs. IAU has recently hit a new all time high of $13.97, which is about a 30% gain. The U.S. dollar index, followed by the PowerShares DB US Dollar Index Bullish fund was flat. Investors have sought out gold over US dollars as protectors against the uncertainty in the markets.
Technology has jumped since the beginning of the year as top PowerShares QQQQ fund holdings like Apple (Nasdaq:AAPL), Qualcomm (Nasdaq:QCOM) and Google (Nasdaq:GOOG) all continued to trade in positive territory.
It's interesting to note the performance of Frontier markets covered by funds like Market Vectors Africa ETF in comparison to traditional international investments covered by the iShares MSCI EAFE Index fund. Frontier markets include areas like South Africa, Nigeria and Morocco. Government corruption, hyperinflation and human rights abuses are a part of the story for the emerging economies of the African continent, but it is not the entire picture. Investors with a high-risk tolerance and an extended time horizon may consider doing more research in this region.
2010 turned out to be a good year for the market. In this case, even holding the S&P500 resulted in double digit gains (even without considering dividiends). The point of this index fund exercise is a reminder to investors to constantly focus on maintaining a diversified portfolio of investments. In addition, investors should also adopt an investment process for rebalancing their holdings by selling a percentage of winning investments and reinvesting those earnings in whatever you deem important or back into the other investments in your portfolio lagging others. (Find out whether these funds can really deliver low-risk returns, read Enhanced Index Funds - Shiny Paper Or Sparkling Gift?)
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