It?s tough to watch the market rise sharply if your portfolio has been treading water.

That?s the reality facing many investors that stepped to the sidelines earlier this year after seeing their portfolios soar in value since the bottom in March 2009.

But it could have been worse. You could have invested in some absolute duds.

Morningstar keeps track of the performance of all major exchange-traded funds (ETFs) and calculates a major loss for hundreds of these funds in 2013. The key question for investors: Which of these 2013 duds will morph into 2014 heroes? Let?s take a closer look.

Leveraged Gold? Yikes!
It hasn't paid to be bullish on gold this year, as the yellow metal lost its status as inflation hedge. But it?s proved to be downright foolhardy to buy leveraged ETFs that move at two or three times the rate of change in gold prices. These gold leveraged ETFs lost most of the money tied up in them and are clearly too risky to own.

If you are bullish on gold for 2014, you may be better served by buying gold miners or straight-up gold funds that simply move in tandem with gold prices. No need to be greedy with such a speculative and risky asset.



The Factor Shares fund has the ignominious distinction of going long gold (with leverage) and shorting the S&P 500. That was a lousy idea and should be shut down by the fund sponsor. Factor Shares, incidentally has tried this approach elsewhere, with similarly dismal results. The FactorShares 2X: Oil Bull/S&P 500 Bear (NYSE: FOL) and the FactorShares 2X: TBond Bull/S&P500 Bear (NYSE: FSA) are both down more than 60% this year.

Notice the fourth name in this group (which is not comprehensive and merely a sampling). The Global X Gold Explorers ETF (Nasdaq: GLDX) had the bad timing of owning miners in a year when mining economic turned south. But that doesn?t mean this ETF will always be a loser. This fund owns mostly Canadian miners, and in this cyclical industry, lean years are often followed by better subsequent years, as lower prices lead producer to curtail output down to the levels of demand.