Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect nimble, undervalued small caps to enjoy great growth in the years ahead, the Vanguard Small Cap Value ETF
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF's expense ratio -- its annual fee -- is a very low 0.23%.
This ETF has performed rather well, handily beating the S&P 500 over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 25%, 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. Ares Capital
Mining specialist Coeur D'Alene Mines
American Capital Agency
Other companies didn't add quite as much to the ETF's returns last year, but could have an effect in the years to come. W.R. Grace
The big picture
It's always good to hold some small caps in your portfolio, and seemingly undervalued ones are positioned to gain in value. 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 ."