Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the insurance industry to thrive as our population grows and more people need more protection, the SPDR KBW Insurance ETF (NYSE: KIE) 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 insurance ETF's expense ratio -- its annual fee -- is a relatively low 0.35%.

This ETF has not performed very impressively, lagging the S&P considerably over the past five years. But 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. Low interest rates have held many insurers back, while property insurers have taken hits when disasters such as Hurricane Irene have struck, as investors get skittish about blows to insurers' earnings. Still, strong insurers plan for occasional disasters, and many of this ETF's holdings seem attractive, sporting P/E ratios below 10.

With a low turnover rate of 9%, 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. Fidelity National Financial (NYSE: FNF) gained about 11% over the past year. Its title insurance business is suffering in our currently dismal housing market, but the company has been setting itself up to do well in the inevitable recovery with some smart acquisitions.

Other companies didn't add as much to the ETF's returns last year but could have an effect in the years to come. Hartford Financial Group (NYSE: HIG), for example, shed about 24% over the past year, including a big jump when investors realized that Hurricane Irene was going to do less damage than feared. MGIC Investment (NYSE: MTG) lost a whopping 74%, partly because of rising defaults in this difficult economy. Its fortunes will probably improve when employment rises and the housing market recovers.

Genworth Financial (NYSE: GNW) shrank by about 53%, also seeing significant defaults, but a silver lining for it is its diversification into much more than insurance. Its retirement and international operations, for example, posted recent gains.

The big picture
Demand for insurance 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.

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 ."