Make Money in Consumer Discretionary Products the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the consumer discretionary products industry to thrive as the global economy recovers, the Vanguard Consumer Discretionary (NYSE: VCR  ) ETF, based on an index of consumer-oriented stocks, could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in several dozen of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a low 0.24%.

This ETF has performed well, beating the S&P 500 handily over the past three and five years. As with most investments, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver. With a very low turnover rate of 7%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Priceline.com (Nasdaq: PCLN  ) , for instance, gained 162% over the past year. Its international growth potential and good positioning in the hotel business are auspicious, but many worry whether its price has gotten ahead of itself. Shares of Ford (NYSE: F  ) rose 25% and may keep rising, as it recently edged out General Motors (NYSE: GM  ) in volume and has been focusing on fuel economy in all its offerings. Auto parts company Johnson Controls (NYSE: JCI  ) , up 40%, stands to keep gaining as car sales increase.

Other companies didn't add much to the ETF's returns last year, but could have an effect in the years to come. Home Depot (NYSE: HD  ) rose just 10%, while Lowe's (NYSE: LOW  ) has had a small loss in the past year. The real estate market has been sluggish, partly due to oversupply, but the tide will eventually turn.

The big picture
Demand for consumer products such as cars, movies, faucets, and shoes isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across the industry -- and make investing in and profiting from the sector that much easier.

ETFs can help you find the way to better investing results. To find some great ETF investing ideas, take a look at The Motley Fool's special free report, "3 ETFs Set to Soar During the Recovery."