By Daniela Pylypczak

For the most part, many people would agree that  investing can sometimes be a crapshoot. Investors often find themselves playing a game of musical chairs, shifting their assets to the seemingly most promising corners of the financial universe. Sometimes these bets pay off, while other times investors get burned and are left with a sour investment. When thinking about which sectors and asset classes have performed best over a relatively long period of time, many would point out perhaps the most obvious choices like gold, preferred stocks and maybe even technology.

But as many can attest to, sometimes the "hidden gems" of the investable universe turn out to be the biggest winners over the long haul. And thanks to the evolution of the ETF industry, investors can gain cheap and easy access to these overlooked segments of the market. Below we highlight three ETFs with surprisingly stellar three-year returns:

1. iShares MSCI Thailand Index Fund (THD)
The emerging markets of Asia have certainly come a long way in recent years, establishing themselves as promising and growing economies and attracting a significant amount of interest from investors around the globe. Powerhouse economies like China and India are often in the spotlight, but there are in fact a number of lesser-known emerging markets that have delivered some of the best returns.

Thailand is one of these economies; the country has managed to perform extremely well despite having to recover from a major natural disaster as well as the global economic slowdown. iShares' THD, has reaped the benefits from Thai equities' strong performances, gaining nearly 114% in the last three years [see also Emerging Markets ETF Cheat Sheet: Yields, Returns, Fees & More].

The fund maintains a portfolio of about 90 different stocks, the majority of which are giant and large-cap companies. THD invests in multiple sectors of the Thai equity market, but has a bias towards financial services, energy, basic materials and consumer defensive securities.

2. iShares FTSE NAREIT Retail Capped Index Fund (RTL)
 
After the infamous housing bubble and the unprecedented market collapse in 2008, many investors had understandably sworn off any investments in real estate. And after seeing bottom lines virtually disintegrate, investors quickly disposed their portfolios of REITs, unable to tolerate such extreme volatility and high downside risk. But for those who were able to call the bottom of the real estate market, investments in this frustrating asset class have certainly paid off, rewarding investors handsomely over the years.   

Those investors who were lucky enough to buy in at the bottom of the crash are now enjoying the benefits from investing in real estate, a segment that is known for delivering consistently high real returns (with the exception of the crash in 2008) and low correlations to stocks and bonds. And with the slow and steady rise in real estate, iShares' RTL, which primarily invests in companies that own and operate shopping malls and retail centers, has been able to deliver an incredible 111% return to its holders over the last three years.

Similar to RTL, the FTSE NAREIT Residential Index Fund (REZ) also invests in REITs, but has a focus on the residential real estate sector of the U.S. equity market. Over the last three years, REZ has provided investors with a juicy 108% return.

3. PowerShares Dynamic Pharmaceuticals Portfolio (PJP)

Pharmaceutical companies have long been popular investments as they offer relatively inelastic products as well strong dividend yields, giving investors both growth and value in their portfolios. Even during times of financial turmoil, like 2008, the health care sector is known for attracting significant amounts of capital inflows.

As the U.S. population continues to age, demand for pharmaceuticals has surged and is expected to continue its rise for years to come. PowerShares' PJP is just one of the five pharmaceutical-focused ETFs available on the markets, but its dynamic portfolio allocation strategy has allowed it to stand out amongst its competitors.

PJP employs a fundamental screening methodology that is designed to select pharmaceutical stocks based on a variety of investment criteria, including fundamental growth, stock valuation, investment timeliness and risk factors. The quant-based methodology has proven its worth, as PJP has gained over 105% during the past three years.


Daniela Pylypczak is a writer at ETFdb. ETFdb offers a comprehensive and original ETF database and analytical consulting services for advisors and investors, as well as a free newsletter. Learn more about their services by visiting ETFdb.com.  Disclosure: the author had no positions in the securities named in this article at the time of writing.