With the current market turmoil lately, many investors are seeing their financial statements take a pretty severe hit. Most are unaware of what they are invested in, or how to adjust their portfolio. But, the "diy investors" out there know that using ETF's is a great way to diversify when needed. 

The question is which ETF's to choose, and how to know that they are a good addition to a diversified portfolio. Let's take a look at one way that you can delve into the myriad of ETF's and come out the other end diversified.

The first thing we will want to do is look at what makes us feel that our portfolio is diversified? Would you like to include the S&P 500? Maybe we could add some Gold or other commodities? And, of course we will want to have some ETF's that are not based in the states. Maybe, Europe, Brazil, Mexico? No matter how you choose to diversify, I can promise you that there will be at least one ETF ready to accept your business.

Let's start with the S&P 500. If you are  frequent reader of my posts you will know that I prefer the (SPY  ). for many reasons this is by far the best vehicle to serve as a proxy for the S&P 500. Most importantly is liquidity. There simply isn't another S&P 500 ETF that can even come close. So, the SPY will give us the US market exposure of large, well known companies.

Next we will look at commodities. Depending on which you choose there can be many options. Let's say you focus on Gold (GLD  ) since that is quite popular right now. The Gold Trust ETF (GLD  ) can provide you the same performance (less fees) of the actual price of gold! Now, don't get sucked into the other names like (DUST  ), or (NUGT  ) which are leveraged products that seek to perform some multiple of the gold mining stocks. Just as it says right on the prospectus, these ETF's are only suited for intra-day trades or very short term investments. Again, stay away from leveraged gold, or gold miner ETF's!

Lastly, we will look to add some global diversification. To do this you can choose a country that interest you and focus on that, or you can use them all! We will give you a few examples of our favorites.

To focus on Europe, which is a hot topic right now, we can look at the Currency Shares EUROPE (FXE  ). Just as the name implies you get the exposure of Europe but with the currency kicker. This ETF is designed to track the price of the Euro. It is a popular ETF and can be especially handy as a  hedge against stocks you may own that are heavily affected by a strong dollar.

The Olympics are coming up so lets talk about Brazil. Maybe you think that investing in Brazil during the Olympics is a worthwhile investment. One good way to use an ETF for that will be using the (EWZ  ). This etf will invest you in large and mid cap companies in Brazil. Now for this ETF I will give it a B+ overall. The reason is liquidity. Its not great, but its not bad either. The average person should have no issue with liquidity, but be particular about your orders, and enter at your price.

Lastly, we have Mexico. if you feel you need some exposure to Mexico then consider the ETF (EWW  ). This etf seeks to expose you to a broad range of companies in Mexico and is very diversified in itself. There are not a lot of ETF's for Mexico, but the EWW is the most popular and therefore the most liquid for now.