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In a 2008 joint survey of investment professionals conducted by State Street Global Advisors and the Wharton School of Business, 67% characterized exchange-traded funds (ETFs) as the most innovative investment vehicle of the last two decades and 60% stated that ETFs had fundamentally changed the way they constructed investment portfolios.

The actions of investment professionals speak just as loudly as their words; ETFs are the fastest growing segment of the mutual fund industry. Between 2001 and 2008, US-based ETF assets grew at an astounding compounded rate of 44% per year! The global ETF business has grown into a more than $1 trillion industry. Although still smaller than the $19 trillion in traditional mutual fund assets, ETFs may one day surpass mutual funds given their inherent advantages.

What is it about ETFs that have taken the investment industry by storm? While both ETFs and traditional mutual funds offer investors the benefit of instant diversification at a relatively low cost, there are at least six advantages ETFs have over traditional mutual funds:

Lower Management Fees

Lower Fund Transaction Costs

Direct Commodity Exposure

Portfolio and Price Transparency

Lower Minimum Purchase

Trades Like a Stock

Understanding the general advantages of ETFs is only half of the battle, however. The question remains which industry sectors and which specific ETFs within those sectors are most likely to become the top ETFs for this year and beyond. Not every ETF is inexpensive and some track strange, custom-built indexes that include unexpected (and unwanted) securities. You need to know the difference between the ETFs that should be avoided and which are the true gems that must be bought.

Based on my in-depth analysis of industry trends, I have uncovered the five best ETF investment themes for the next 12 months: (1) water ETF; (2) general Asia ETF; (3) Dim Sum Bonds ETF; (4) commodity ETF; and (5) gold ETF. In my FREE report, I reveal the specific ETFs within these sectors primed to deliver the largest out-performance potential.

Keep reading to discover the best water ETF, Asia ETF, Dim Sum Bonds ETF, commodity ETF, and gold ETF to own now!

Top Water ETF

Well Diversified ETF in Hot Sector

As the global population continues to swell, supplies of clean drinking water have grown increasingly scarce. Although 70 percent of the Earth is covered in water, only 3 percent of this is fresh water. Much of this fresh water is locked in ice caps, inaccessible or unusable, leaving only 0.3 percent available for human consumption.

Given the dire nature of the situation, expect a drastic increase in infrastructure spending in upcoming years, with an emphasis on water-related projects.

My favorite water ETF is well positioned to take advantage of this global trend, holding a portfolio of 32 companies that manufacture pipes, pumps and other water infrastructure equipment, as well as water utilities and treatment outfits.

Top Asia ETF

Broad Foreign Exposure at a Bargain Price

Economic growth is shifting from the developed economies to the developing ones, and Asia is leading this transformation. Unlike the U.S. and Western Europe, Asia isnt facing a painful de-leveraging process; banks, consumers and companies enjoy low debt levels. Ignoring the dynamism of Asia will ultimately stymie your portfolios growth. Its viability is becoming clearer by the day; the US and other indebted, slow-growing economies simply cant offer the returns to which growth investors are accustomed.

Asia can easily grow three times faster than advanced economies. The region has entered a cycle of capital investment, infrastructure spending and domestic consumption thats still in its early stages. Ignoring Asia outright will prove to be one of the biggest mistakes an investor can make.

This Asia ETF provides exposure to all of the key Asian trends, from the infrastructure build-out in China and India to the rise of the Asian consumer and the maturation of regional financials.

My top Asia ETF to own now offers broad Asia exposure while charging an expense ratio of just 0.72 percent, handily beating comparable mutual funds.

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