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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect technology-oriented companies traded on the Nasdaq to thrive once the market recovers from its recent tailspin, the First Trust NASDAQ-100-Tech Index ETF (Nasdaq: QTEC ) 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 100 of them simultaneously.
The ETF tracks the NASDAQ-100 Technology Sector Index, which features 100 equally weighted (after quarterly rebalancing) companies.
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF's expense ratio -- its annual fee -- is 0.60%, which is less than most active funds, but somewhat high for a sector index ETF.
The ETF has performed reasonably well, outperforming 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 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. Baidu (Nasdaq: BIDU ) , China's largest search engine, gained about 63% over the past year. Among other things, investors are excited that Facebook is partnering with Baidu when it opens in China.
Other companies hurt the ETF's returns last year, but could have an effect in the years to come. Akamai Technologies (Nasdaq: AKAM ) lost about 49% over the past year, but holds promise as cloud computing grows. It recently announced plans to work together with Riverbed Technology (Nasdaq: RVBD ) to accelerate content delivery.
Broadcom (Nasdaq: BRCM ) shed about 8%, but it has been performing well lately, reporting rising revenue and profit margins, though it has suffered somewhat from the struggles of its major chip customer Nokia (NYSE: NOK ) .
The big picture
Demand for newer and better technology isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across tech stocks -- and make investing in and profiting from such companies 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."