Sometimes, analyzing ETFs is easy. Here's the latest example: Van Eck’s new local currency emerging markets bond ETF is just better than its competitors.

Why? Because it fits my definition of what an ETF should do: Provide reliable, focused exposure to whatever asset class investors think they are buying.

I'm not saying "Best ETF Ever!" or anything. I don’t actually agree with Rob Arnott’s assertion that there could be a “generational buying opportunity” in emerging market bonds [Editor's Note: Rob's view is predicated on renewed global weakness] . To my mind, there’s a good reason that emerging market bonds trade at a discount to developed market bonds. For all their growth and capital reserves, emerging market economies are exposed to tremendous social and political risk. Many also have undiversified, extraction-based economies that could run into trouble if and when commodity prices come down. Witness Russia a few years ago when oil prices fell to $35/barrel: The Russian “miracle” started looking like a curse pretty darn quick.

Still, I can see the argument, and I also see this: Any investor who wants to bet on emerging market bonds ought to do it with Van Eck’s ETF (NYSEArca: EMLC), assuming the fund attracts sufficient liquidity to trade well in the open market.

Area #1: Emerging Markets

Currency returns are a key driver of the diversification benefit that makes investing overseas valuable. Buying dollar-denominated emerging market bonds—as the $1.8 billion iShares JPMorgan USD Emerging Markets Bond (NYSEArca: EMB) and the $700 million PowerShares Emerging Markets Sovereign Debt ETF (NYSEArca: PCY)—is like sky-diving with a bungee cord. If you’re going to take the leap, you ought to do it all the way.

In fact, I think the vast majority of investors in EMB and PCY think they are buying local currency exposure. That’s what we’re used to in stocks, where currency returns are a key driver in funds like the iShares Emerging Markets ETF (NYSEArca: EEM).

But thinking about EMLC got me thinking about other places where investors don’t get the exposure they think they’re getting with ETFs. There are at least a dozen areas where investors get bamboozled. I lay out four more below.

Area #2: Corporate Debt

Do investors in corporate bond ETFs realize they are allocating more of their money to the most heavily indebted companies?

I would say no.

My guess is that the majority of investors in LQD and similar funds think they’re buying bond exposure to large-cap, S&P 500-level companies, weighted, more or less, along the same lines of the S&P 500.

How many investors in the iShares iBOXX $ Investment Grade Corporate Bond Fund (NYSEArca: LQD) realize their top holding is Verizon (NYSE: VZ), not Exxon, Apple or Microsoft?

I would say very few. Modern corporate bond indexes are built in a counterintuitive manner, and investors who don’t take the time to figure this out could be very surprised by the pattern of returns they receive.

Area #3: Crude Oil

We’ve covered this one to death, but I still think many investors in the United States Oil Fund (NYSEArca: USO) think they’re buying exposure to spot oil prices and not to oil futures. As this chart shows, those are two dramatically different things.

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