Over the past decade there have been hundreds of new exchange traded products that have come to market. A favorite of mine is the Oil ETF, it is a liquid trading vehicle with plenty of volatility. For every great ETFin existance however, there is another one that sucks. The ones I avoid now are alot of the short and / or leveraged short funds because of performance lag. The leveraged volatility etfs are almost impossible to make money with unless your timing is perfect. I would like to tell average investors to please steer clear of these because they are not investor friendly. I find it amazing that the regulators who have dropped the ball so many times in the past 20 years haven’t regulated these products. Now back to the good stuff, there really are some excellent benefits to a good ETF. In general, unless you are trading for short term gains you should avoid the leveraged ETF products, you are much better off in stock or physical commodity based ones that avoid leverage. It’s easy to see this by comparing USO (oil futures) to XOP which holds stocks of oil producers, the stock based version always wins over time. Needless to say, you will want to look at for funds that focus on oil stocks to invest in this sector. Generally, if you can’t find a physical commodity ETF for something, it means you should go with one that holds stocks of the producers. You can’t go wrong following this same philosophy when it comes to stock market based instruments as well. The best scenario is to look for funds that mirror the indices by purchasing the same exact stocks in the same weightings, avoid the ones that use futures instead. If you look at the monster S&P 500 ETF (SPY) you will see that the correlation is almost perfect with the index. However, this is just one example of many excellent investment vehicles, the main thing is to do a little research. There are free historical charts online for all ETFs and funds so there is no excuse for not looking at them. Performance against the relevant benchmark is the only way to see if it’s a good investment. If it outperforms at times and under performs at time, I want to know that prior to investing. Due to trading costs and administration fees it’s normal for ETFs to do slightly worse than the underlying over time. These are things that primarily affect long term holders who want to stay with an asset class for long periods of time. The cost of daily re-alignments in the leverage funds tends to jack up trading costs and is another reason they tend to do poorly over time. A combination of no financial leverage, low expenses and good performance history vs. it’s target is what to look for in a winning investment!