Opportunity #1: Commission-free ETFs
The most exciting thing to happen in ETFs in recent years is the dawn of commission-free trading programs at places like Charles Schwab, Fidelity Investments and TD Ameritrade.
While ETFs have been a great solution for institutional investors for years, until the dawn of these programs, they had been a terrible idea for the retail investor. If you're like me and you save $500 or $1,000 or $2,000 every month and you want to put it to work in the market, doing so with ETFs used to be impossible: The commissions would eat you alive!
But today you can trade more than 100 ETFs commission-free at Schwab and TD Ameritrade or move 65 different iShares ETFs at Fidelity.
One of the things I do at my website, ETF.com, is to track the lowest-cost ETF portfolio in the world. You can read about it here. It holds six ETFs, representing more than 3,500 stocks, 800 bonds and 19 different commodities. It's a great portfolio, and it has a blended expense ratio of less than 0.09 percent per year, or $9 for every $10,000 invested.
And the great thing? For 95 percent of that portfolio, you can trade it, rebalance it, do anything with it—for free—through Schwab.
[Note: The commodity portfolio included—the UBS Dow Jones Commodity Index ETN (NYSE ARCA:DJCI)—is not available under the free trading program at Schwab. But you can replace it with the slightly more expensive US Commodity Index Fund (NYSE ARCA:USCI), which is available and, quite honestly, a better fit for most investors. It relies on a strategy rooted in decades of academic research to rotate into commodities experiencing scarcity, which should lead to better long-term returns.]
Even with this quasi-active commodities fund, the portfolio will still cost you less than 0.10 percent in annual fees. It's an amazing deal. Commission-free trading programs have transformed the marketplace for retail investors.
(Read more: ETF unfinished business in 2014: crushing mutual funds)
Opportunity #2: Currency-hedged ETFs
The second most exciting thing to happen in ETFs recently has been the dawn of currency-hedged ETFs.
You may be familiar with the WisdomTree Currency Hedged Japan ETF (NYSE ARCA:DXJ). It was the single most popular new ETF in the world last year, pulling in more than $12 billion in assets. DXJ offered strong exposure to Japanese stocks, while hedging out exposure to the falling yen. Investors lucky enough to buy it at the start of 2013 enjoyed a stunning 40 percent move. And the currency hedging mattered: The traditional, unhedged iShares MSCI Japan ETF (NYSE ARCA:EWJ) rose only 26 percent. Being smart about currency netted you an additional 14 percent!
Today there is a whole suite of currency-hedged products. You can get currency-hedged exposure to Europe, to Germany, to Brazil, or to the entire international world.
Think of it this way: The euro is currently fetching $1.35. Wall Street consensus has that dipping to $1.22 or so over the course of 2014, as the U.S. Federal Reserve begins to taper. If that's right, a currency-hedged Europe ETF, like the WisdomTree Currency Hedged Europe ETF (NYSE ARCA:HEDJ) or the DB X-Trackers MSCI Europe Hedged Equity ETF (NYSE ARCA:DBEU), should outperform a traditional European investment by roughly 10 percent. Not bad for a day's work.