Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect undervalued large-cap stocks, of which there are many, to appreciate as they eventually get closer to their intrinsic value, the Vanguard Mega Cap 300 Value Index ETF
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is an ultra-low 0.13% -- and it yields more than 2% annually in dividends.
This ETF has not outperformed the market over its life, but it's also very young, with just three full years on the books. That's not a long enough time in which to draw meaningful conclusions, especially as the nation digs out from a recent recession. 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 26%, 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. Altria
United Technologies'
Other companies didn't add as much to the ETF's returns last year, but they could have an effect in the years to come. Intel
General Electric gained 8% and has been hiking its dividend significantly in recent years, after a big recession-related cut. Investors stand to benefit as the company expands in China and invests in alternative energy businesses, among many others.
The big picture
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 ."