Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect U.S. consumer services companies to thrive as our economy inevitably starts heating up again, the iShares Dow Jones US Consumer Services ETF (NYSE: IYC ) 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 lots of them simultaneously.
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a fairly low 0.47%.
This ETF has performed rather well, beating the S&P 500 over the past three, five, and 10 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 an ultra-low turnover rate of 4%, 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 example, gained about 68% as it continues to grow strongly abroad, with just 23% of recent bookings coming from the U.S. You might think that it can't grow much more after that, but its forward P/E was recently below 18, and it has averaged share price growth of 75% annually over the past five years.
Las Vegas Sands (NYSE: LVS ) gained about 46%, and with Las Vegas itself struggling, investor eyes are on the booming gambling center of Macau, where Las Vegas Sands is opening a new property. Macau has already been very good to competitors such as Melco Crown (Nasdaq: MPEL ) and Wynn Resorts (Nasdaq: WYNN ) . Some of these companies are now looking to expand into Spain.
Other companies didn't add as much to the ETF's returns last year, but could have an effect in the years to come. Food distribution giant Sysco (NYSE: SYY ) fell 2% over the past year, pressured by rising food prices. Still, investors are hopeful that its investments into efficiency-boosting technology will pay off. And in the meantime, it's raised its prices and kept paying a solid dividend. Similarly, Lowe's (NYSE: LOW ) shed 12% in value, struggling in a persistently weak housing market. That will turn around one day, though, and while it waits, the company is buying back many of its shares.
The big picture
Demand for consumer services isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
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