3 ETFs Set to Soar During the Recovery
Exchange-traded funds (ETFs) have revolutionized investing. Giving individual investors access to sophisticated investing strategies available only to the pros just a decade ago.
The best part: ETFs are cheap to own (very low expense fees). And they're liquid. Meaning you buy and sell them in real time just like stocks -- except that with an ETF you're controlling hundreds of stocks with a single trade!
Giving you the power to instantly diversify your portfolio or quickly seize opportunities to profit from coming macroeconomic trends (like an energy crisis or a housing boom) that could push a basket of stocks up or down.
A quick example: Want to tap into the wealth-building power of the international markets? (And hedge against your U.S. investments?) Purchase an ETF that tracks the developed international markets of Europe, Australasia, and the Far East (the MSCI EAFE Index). It's like adding 800 of the very best international stocks to your portfolio -- instantly! And for just 0.35% in annual fees.
One more: You may have heard the old adage "Small caps lead bull markets." Truth is, small caps don't just lead into bull markets, they charge into them -- handing investors an average return that's more than double that of the S&P 500, according to data from RidgeWorth Funds (a Lipper Award-winning firm). Want to expose your portfolio to that kind of growth?
All you have to do is snap up an ETF that mirrors the small-cap index -- the Russell 2000. And it costs you less than 0.25% annually. That's 65% cheaper than what the average mutual fund charges. And you're harnessing the collective power of thousands of stocks.
With ETFs, you're able to buy a diversified group of stocks from any sector, market capitalization, region, or even country with just a click. And since many ETFs track indices, they are tax efficient -- because they rarely sell the underlying stocks.
It's no wonder that, investors have entrusted more than half a trillion dollars to purveyors of ETFs.
But be warned: ETFs may be easy to add to your portfolio, but they are much more varied and powerful than mutual funds. Specialty ETFs can be dangerous if not used properly. As Forbes reports, "Extreme leverage [and] market manipulation can blindside unsuspecting ETF investors."
So to help you chose from the more than 720 ETFs available today, we recently polled top Motley Fool analysts and narrowed the field down to just three.
Our analysts believe that each could rebound nicely over the next year or two, making them excellent long-term holdings. Plus each is positioned to profit from a near-term catalyst. Giving you the opportunity for quick and substantial gains as well as long-term security.
Let's dive right in and take a look at our first ETF, that's smack-dab in the middle of one of the greatest wealth-building opportunities of the next decade.
The Only ETF You Need for the Next 41 Years
A unique advantage gives this ETF a big leg up on the competition...
One of the most significant lessons the world has learned from the recent global economic downturn is that not all of the emerging economies are as closely coupled to developed economies as we previously thought.
Emerging economies that are largely dependent on America -- like Mexico, for example -- will continue to struggle as America emerges from the meltdown. And Eastern European economies, many of which are mired in debt, could take years to turn around.
But the situation in China isn't nearly as dire as analysts predicted just a few months ago. In fact, its economy is on pace to grow by nearly 9% this year, in spite of the global turmoil. This growth is fueling demand for raw materials, which bodes well for commodities exporter Brazil, as well as for Russia, a significant producer of coal and oil. And India -- with its surging economy -- is looking more promising every day.
All this is why the Claymore/BNY Mellon BRIC ETF [NYSE: EEB] presents such a compelling investment opportunity right now.
Though there are many BRIC (which stands for Brazil, Russia, India, and China) ETFs on the market, this one is uniquely positioned to profit from the strong financial footing of Brazil and China. At the end of March, the fund was 55% allocated to Brazil and had a 30% allocation to China, with the remainder divvied up between India and Russia.
Why so heavily tilted toward Brazil? First and foremost, it is one of the most, if not the most, self-sufficient countries on the planet today. With tremendous natural resources, vast spreads of arable land, and a large population, Brazil has little need for trade. But the rest of the world is not nearly as fortunate, so Brazil's natural goods are in high demand and the country has profited nicely from this.
In 2008, Brazil's debt was promoted to an investment-grade rating, even as its stock market, represented by the Bovespa Index, dropped more than 40%. But as any Fool knows, this volatility presents opportunity for long-term investors.
This belief is strengthened by the fact that The Economist reported that China, the world's second-largest economy, "recently overtook the United States as Brazil's biggest export market." As China continues to grow into the world's largest developed economy, Brazil and China will prosper together.
Russia also carries potential with its abundant natural resources. Russia lays claim to more commodity reserves than any other country in the world, including roughly one-half of the world's coal reserves and more petroleum than any other nation. Unfortunately for Russians, its climate and soil make extraction difficult, but as natural resources dry up throughout the world, Russia will prove to be the final fuel frontier.
Lastly, just as Brazil and Russia hold vast amounts of natural resources, India boasts a wealth of people. More than 1.1 billion citizens strong, and though a quarter of those people currently live below the poverty line, India is striving to facilitate growth among all classes of citizens and improve state-funded services. All this is why the World Bank believes India is "poised to... join the ranks of the world's middle-income countries" in the not-too-distant future.
With their strong populations, natural resources, and growth potential, the BRIC countries are poised for significant growth over the next several years. Many analysts believe they will be the world's dominant economies by the year 2050 -- which is not that unrealistic a possibility. But the time to get in is now.
Our next ETF pick is another long-term play. But like our BRIC ETF, the time for getting in early and reaping the largest gains possible is running out! Get all the details just ahead.
Snap Up This ETF Before Oil Spikes Again
Cash in on the world's unquenchable thirst for energy...
The notorious oil bubble of 2008 and its subsequent burst has left a sour taste for energy stocks in many investors' mouths.
However, this economic crisis has added a new twist to an investment thesis in energy.
As demand for oil has decreased over the course of this recession, oil companies have slowed pumping. This doesn't seem problematic, especially since America's oil inventories currently are at a huge surplus -- higher than at any point in the nation's history, except during September 1990, leading up to the first Gulf War, according to The Economist.
But a huge problem will come when the economy turns around.
When this occurs, the surplus will quickly dry up and the lag time between that point and the point when oil companies resume high-production pumping will cause the price of oil to spike once more. At a recent OPEC summit, it was reportedly difficult "to find anyone who did not expect a price rise to rival the giddy leap to $147 a barrel in 2008." The CEO of Chevron [NYSE: CVX] believes that "another period of tight supply" is inevitable.
All of this might make you nervous about a subsequent rise in prices at the pump, but it bodes well for owners of the Vanguard Energy ETF [NYSE: VDE]. This ETF, with a bargain-basement price tag of just 0.25% in annual fees, lays claim to 160 energy-related companies primarily based in the United States, ranging from oil drillers to oil explorers and storage companies.
As if the predictions above weren't enough, there's a wild card that will further aggravate the problem. Remember those emerging economies we described earlier? Although demand has nearly fallen off a cliff in the developed world, those emerging economies haven't witnessed such a drop. In fact, China's importation of oil is nearly as high as it was before this global recession began. If this trend continues, even more pressure will be put on the price of oil.
This ETF could see significant upside over the next year or two. But if oil prices once more rise to more than $150 a barrel (and the stock prices of oil companies join in on the ride up), the risk/reward scenario will shift. At that point, it would be better to take your profits and invest them in more attractive opportunities.
Speaking of attractive opportunities... let's take a look at our next ETF. It tracks a sector that was white hot at the beginning of the decade. And though it may have fallen out of favor with some investors... it has plenty of room to run.
When Tech Rebounds This ETF Could Skyrocket
Can't decide between Apple or Microsoft? Own all high-tech juggernauts with one trade!
Another sector that is ripe for a rebound is technology.

The McKinsey Quarterly recently reported, "In three of the four most recent recessions, higher consumer discretionary and IT spending led the way."
The CEOs of semiconductor purveyor Intel [Nasdaq: INTC] and networking supplier Cisco Systems [Nasdaq: CSCO] have both publicly admitted that it appears orders have bottomed out.

While this hasn't yet translated to the PC market, that should soon follow. In fact, the CEO of Hewlett-Packard [NYSE: HPQ] stated that this global recession has "created a lot of pent-up demand because it [has] disrupted the normal cycle of tech upgrades."
A Forrester Research analyst recently put it this way: "A lot of CEOs are actually going to look back at the numbers and say, 'Things aren't so bad.' The economic numbers send a signal that maybe we shouldn't be cutting back on spending so much." And when this shift occurs, the stocks of technology companies are sure to spike.
This is why now presents an opportune time to buy some shares of the Vanguard Information Technology ETF [NYSE: VGT]. It holds over 400 technology stocks, including those leaders mentioned just above, all with a price tag of just 0.25% a year.
Of course for all their advantages, ETFs have one crucial limitation -- their growth hinges on the performance of a group of stocks. Meaning while one stock rockets up, another one could be plummeting...
There's no denying ETFs are the safer play. And over time, the right ones could hand you some nice returns.
But if you want pure, unadulterated growth, you'll want to invest directly in the healthy, competitive companies that could use the coming tech rally to build unbelievable returns. Here's an example... (It's our top pick for new money right now.)