The Five Best ETF Investments Ever

April 25, 2012


Last week, I looked at the Five Worst ETF Investments Ever. I took all of the nonlevered ETFs on the market, sorted them by total return since inception, and found the five that had lost the most money. It wasn't pretty.

This week, we decided to flip that on its head and look for the five best ETF investments ever.

I had my own notions going in about what would rise to the top. For starters, I assumed that the SPDR S&P 500 ETF (NYSEArca: SPY) would end up somewhere on the list. After all, it is the oldest ETF, with a nearly 20-year track record. That's a long time to compound returns.

But SPY didn't make it. Its total returns of 333.65 percent put it sixth overall, just a hair short of the top five.

I also thought the list would be dominated by funds focused on the BRIC countries—Brazil, Russia, India and China. I thought China in particular would stand out. After all, that's all we've heard about for most of the past decade. But the BRICs barely make an appearance, and China, the BRIC everyone talks about, is nowhere to be seen.

What was the best-performing ETF ever? Honestly, I wouldn't have guessed it in a dozen tries …

Number 5: iShares MSCI Brazil Index Fund (NYSEArca: EWZ)
Date of Inception: 7/10/2000
Returns Since Inception: 355.17%
Assets Under Management (4/12/2012): $9.06 billion
Total Inflows Since Inception: $7.05 billion

Who knew EWZ would turn out to be the only BRIC fund to make an appearance on my list? Launched in 2000, EWZ provides broad-based exposure to Brazil, which has been the best-performing BRIC country by far in recent years.

EWZ's great returns can be tracked back to a couple of things. First, iShares launched this ETF in July 2000, which just happened to be the perfect time to catch and ride the wave of booming investor interest in emerging markets that was the early 2000s.

Secondly, for U.S. investors, EWZ allows exposure to currencies. With currencies, one can't go up without another losing value, and the Brazilian real has appreciated sharply against the American dollar since the fund's launch in 2000.



Number 4: iShares MSCI Canada (EWC)
Inception Date: 3/18/1996
Returns Since Inception: 359.24%
Assets Under Management (4/12/2012): $4.62 billion
Total Inflows Since Inception: $4.15 billion

The iShares MSCI Canada Index Fund (NYSEArca: EWC), which tracks the MSCI Canada Index, is the second-oldest ETF on the list. Like a good Canadian, EWC is quietly impressive. It offers plain-Jane exposure to the Canadian market, but somehow, has racked up a 359 percent gain since inception.

This success can be partially and undeniably traced back to its age, since no fund could have made it past its 18th birthday without showing some positive returns along the way.

It probably doesn't hurt that 26 percent of EWC's holdings are in energy, which has been booming ever since the Internet bubble burst. And finally, like EWZ, EWC has benefited from currency impact: The Canadian dollar, or loonie, has soared since 1996, rising from around $0.70 USD to $1.01 today.




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