While much of the fate for 2013 will be tied to whatever the outcome of the fiscal cliff is, the robust inflows into exchange traded funds (ETFs) are expected to continue throughout the next 12 months. For investors, ETFs can provide a great way to target certain sectors/industries, markets or nations as a way to outperform static indexing. The security type has exploded in popularity and now can be found in many portfolios.
With 2012 coming to a close, it's time to take a look at what the new year will bring for ETF investors. So here's Investopedia's look at some of the ETFs that could see big investment gains in the new year.
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Emerging Market Funds
As the fiscal worries still persist here and in developed Europe, investors looking for outsized gains have once again flocked to emerging markets. Featuring strong economic growth, a rising middle-class consumer and stable fiscal and monetary pictures, developing nations are once again becoming en vogue with investors. S&P Capital IQ estimates that "diversified emerging market products will continue to garner attention as investors seek out low-cost, diversified ways to take on added risk in hopes of achieving higher returns."
That will directly benefit funds like the PowerShares S&P Emerging Markets Low Volatility (ARCA:EELV), the new iShares Core MSCI Emerging Markets ETF (ARCA:IEMG) and Vanguard MSCI Emerging Markets ETF (ARCA:VWO). These funds should provide healthy gains as investors once again bet on the developing world.
SEE: Advantages And Disadvantages Of ETFs
As its economic growth has stagnated over the last few months, China has unveiled a series of new stimulus measures. Those measures seem to working in several key markets across the Chinese economy as it has once again regained steam. For example, the nation's manufacturing data has been strong and housing prices have leaped. All in all, a stronger Chinese economy will constrain metals supplies and increase base metal pricing.
Base metal copper is king of them all and should see the biggest increase. Bank of America (NYSE:BAC) estimates that copper prices will hit $7,750 a ton by the end of 2013. That'll help funds like the iPath DJ-UBS Copper ETN (ARCA:JJC) and United States Copper (ARCA:CPER) see signs of life again.
The heart of the fiscal cliff debate is about higher taxes versus spending cuts. While most analysts estimate that Congress will come up with a solution, that solution will most likely be a combination of the two. That fact has helped push municipal bond fund's prices higher and higher.
That trend should continue into 2013 as taxes will undoubtedly go up, and interest rates are still poised to stay low.
Top funds in the sector getting the nod from investors could be the $3.47 billion behemoth iShares S&P National AMT-Free Muni Bond (ARCA:MUB) as well as the higher yielding Market Vectors High-Yield Muni ETF (ARCA:HYD).
SEE: 4 Ways To Use ETFs In Your Portfolio
European Focused Funds
Whether investors were looking for yield, deep values or just betting on the fact that things couldn't get much worse, European focused ETFs actually produced some very pleasant returns in 2012 and those returns could carry on into the new year.
Even though the region is fraught with plenty of risks, there are plenty of opportunities as well. If the emerging world continues picking up its economic pace, then Europe's big exporters will do well. That'll benefit a host of nations in the eurozone and investors in the iShares MSCI EMU Index (ARCA:EZU).
While gold remains the go-to precious metal for many portfolios, analysts estimate that 2013 could be the year of silver. Thompson Reuters GFMS estimates that silver investors in 2013 will see as high as 38% as the metal surges towards $50 an ounce. The main drivers will be a return of industrial demand as well as continuing loose monetary policies.
That means now could be a good time to load up on the iShares Silver Trust (ARCA:SLV) or the ETFS Physical Silver Shares (ARCA:SIVR). Both represent physical silver locked within a vault and track the price of the metal.
The Bottom Line
With 2012 coming to a close, investors are eager to begin strategizing for the new year. One thing they should keep on their shorts lists are ETFs. The previous funds should be real winners as the year progresses and the market matures.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.