2013 was a phenomenal year for stock investing, as the S&P 500 added more than 30% in the time frame. This came after a flat 2012, and the great performance was had despite worries over the taper and still muted economic growth.
It was also a great year for the ETF world as well, as close to 100 (net) new products hit the market, and assets under management crossed the $1.5 trillion mark. Now there are more than 1,500 choices out there, giving investors a near paralyzing amount of ways to slice and dice exposure to hundreds of market niches.
A few of these stand out though, as potential top performers for the New Year. Below, we highlight seven of our best ETF ideas for 2014, any of which we are looking for outperformance from over the next 12 months:
SPDR S&P Regional Banking ETF (NYSEARCA:KRE)
As the Fed continues to taper, longer term rates look likely to creep higher. However, short term rates are holding pretty firm, creating a bigger interest rate spread between long and short term rates.
This is great news for companies like regional banks which focus on ‘basic’ banking activities like lending. After all, these banks borrow money from depositors at low short term rates, and give loans at the higher rates, making it that much easier for these firms to make money.
While there are a number of ways to play this, KRE seems like a fantastic option. The fund holds 80 stocks in its basket, and it currently has a Zacks ETF Rank #1 (strong buy), suggesting that 2014 could bring good things to this fund much like what we have seen in the past few months.
db X-trackers MSCI Germany Hedged Equity Fund (NYSEARCA:DBGR)
Europe is coming back in a big way, and this trend could continue in 2014 as well. However, if the dollar strengthens, euro-denominated investors could lag, meaning that a hedged play could be the way to go.
Investors can do this by targeting Europe’s strongest economy, Germany, with DBGR. This fund offers up great exposure to the central European economy, but does so without the euro, making it likely to outperform more traditional German ETFs if the euro falters in 2014.