Index Funds, Where Are We Now?

By Investopedia Staff | January 09, 2012 AAA

As important economic news is continually hitting the headlines, its important to think about how these developments are affecting 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 if your portfolio has the right balance of risk and return.

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Focus ETF 2011 Return
U.S. Dollar PowerShares DB US Dollar Index Bullish
(NYSE:UUP)
-1.53%
U.S. Equity SPDRS S&P 500 Index
(NYSE:SPY)
-1.22%
Technology PowerShares QQQ
(Nasdaq:QQQ)
0.94%
Europe, Australia-Asia iShares MSCI EAFE Index
(NYSE:EFA)
-15.77%
Energy United States Oil
(NYSE:USO)
-1.82%
Precious Metals iShares Comex Gold Trust
(NYSE:IAU)
+9.57%
Fixed Income iShares Barclays 7-10 Year Treasury (NYSE:IEF) +12.70%


The Market
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 in recent months as investors moved in. From the beginning of the year to now, the S&P 500 (as well as the DJIA) has at times seen gains of close to 10%. However, for 2011 the performance has just below zero. (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 settled at $15.70.

Technology is currently flat compared to the beginning of the year as top PowerShares QQQQ fund holdings like Apple (Nasdaq:AAPL), Qualcomm (Nasdaq:QCOM) and Google (Nasdaq:GOOG) are all flat as well.

Final Thoughts
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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