Two ETF Bets on the Election

09/24/2008 12:00 am EST

Focus: ETFS

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

Doug Fabian, editor of Doug Fabian’s Making Money Alert, finds one ETF he thinks will gain from a McCain election victory and one that will do well if Obama prevails.

It's decision time again.

Every four years, America goes into election mode, and the consequences of choosing a new president always have repercussions for the economy and for investors. But perhaps more than any election year that I can remember, the choice between Democrat and Republican this time around offers up a stark contrast in visions for the country's future—particularly in the realm of economics.

That's why I am going to help you prepare your investment dollars for the outcome of either candidate moving into the White House in January by looking at one sector that's getting a lot of attention as of late—energy.

When it comes to energy, we already have seen that presidential candidate John McCain is now a big fan of oil drilling. It is thus not a stretch to think that oil services and oil drilling firms are likely to thrive if the Republican takes power. That means that ETFs in the oil and gas exploration and production sector have a strong chance of seeing significant upside during a McCain presidency.

One such fund is the SPDR S&P Oil & Gas Exploration & Production Index (Amex: XOP). This ETF uses a passive management strategy to track the total return performance of the S&P Oil & Gas Exploration & Production Select Industry index. (It closed below $50 Tuesday—Editor.)

One of the key planks in Senator Barack Obama’s platform of change is to wean America off oil. To do so, he'll have to pour a lot of money into solar, wind, and other alternatives to petroleum-based energy sources.

That's good news for stocks in the alternative energy space, and fortunately, there are many great ETF choices that give investors exposure to this up-and-coming sector. My favorite ETF in this space is the PowerShares WilderHill Clean Energy (Amex: PBW).

PBW corresponds generally to the price and yield of an equity index called WilderHill Clean Energy. The fund normally invests at least 80% of total assets in common stocks of companies engaged in the business of clean energy and energy conservation. The ETF may invest at least 90% of total assets in common stocks that comprise the Clean Energy Index.

With PBW, you get the best-of-the-best in the solar, wind power, fuel cell, and power management device makers. If Obama wins in November, I would certainly want to start building a position in one or more alternative energy ETFs. (PBW closed below $17 Tuesday—Editor.)

Well, those are some of my thoughts about opportunities that investors will find, depending on who is elected our next president. Remember, no matter who wins in November, you've got to be prepared. You've got to know where your money will be protected, and where your money could benefit most as the inevitable winds of political change blow onto Wall Street.

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