This is the third year we have compiled and analyzed the top-performing exchange-traded funds (.
Only one ETF has made the list of the 10 best performers in all three years: SPDR S&P Retail fund (XRT). The fund’s three-year annualized gain of 30.6% ranks third among all exchange-traded funds. Its three-year performance ranked eighth in 2012 and third in 2011.
Notably only one other ETF retained its top-10 ranking from last year: PowerShares Dynamic Pharmaceuticals fund (PJP). The ETF realized a 33.5% annualized gain over the past three years, the best performance of any ETF over that time period. Last year, the fund ranked sixth among all funds.
What’s notable about the two funds is that they follow two very different types of indexes. SPDR S&P Retail follows an equal-weighted index. PowerShares Dynamic Pharmaceuticals follows a rankings-based index. Companies for PowerShares Dynamic Pharmaceuticals’ underlying index are selected based on a variety of criteria including price momentum, earnings momentum, quality, management action and value. The differences between the two index’s methodologies show that no one single methodology has universally proven to be the best over the past few years.
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