Top ETF picks for the next decade.

The last ten years have seen the Asian financial crisis, the rise and fall of the dot-coms, the real estate boom and bust, the Iraq War, and the present credit crunch. I feel that the next ten will be no different with assorted manias, depressions, bubbles and wars occurring just like they have always done before. I see no reason why the next decade will be any better or worse than the last. Here are some ETFs that I feel will do well as suggested by their back tested performance over the last decade.

My top pick for all low risk investors is the DPN ETF . Its Index and back tested performance is described here . Historical data suggests that the consumer staples sector offers good returns with low volatility.

My pick for the next decade for those who do not care about volatility is is the DGS ETF . Its Index and back tested performance is described here . If you are not worried by an occasional 50% fall in value then dividend paying emerging market small cap stocks offer the highest rewards. Even after suffering an initial 50% drop in the Asian financial crisis this index has returned 20% annualized since 1998. Emerging markets

All the index links above show back tested results for the last decade so you can get an idea of the expected volatility and possible returns.

As you can see I like Fundamental Indexing, I own other ETFs from WisdomTree which creates these ETFs. The particular ETFs above were not available when I was last able to invest so I have ended up with some other stuff (DEM and DFE).

ETFs are funds but may be bought on the stock exchange like any other stock. there is no entry or exit load but there is brokerage. The underlying fund usually has a low annual expense ratio, usually .6% to 0.7% for the Wisdomtree ETFs.

The Hardest problem in investing

You buy and the market immediately dips, the stock price may stay
below your buy point for years for no fault of the company.

It is possible that the World may go into recession
tomorrow, good companies will still deliver and grow value but
psychologically there will be pain. We have had a long bull run and we
may have a long bear run too. Being prepared for the inevitable will
make it less painful.

Here is what I use to help me stay the course.

1) The company must pay a dividend that can be reinvested at good
rates if prices fall. There must be no danger of cutting dividends.
There are some exceptions to this rule ex Brk-b and Infy.

2) Insiders are buying. Knowing that the Insiders have bought at
higher than market prices is fundamentally meaningless but
psychologically very comforting.

The above two tricks may help you stay the course. As an example in
Japan even in the long years of market stagnation, dividend reinvested
indices have given positive returns.
For example see http://www.wisdomtreeindexes.com/index-details.asp?indexid=29
The high dividend stocks of japan have returned 7.5% while msci japan
(not msci japan value in the above link) has returned around 3% annualized total returns
for the last decade. Staying invested has beaten selling out and putting your money in the bank.