Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the global shipping industry to thrive as our world's economies get back on track, the Guggenheim Shipping ETF (NYSE: SEA ) 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 shipping ETF's expense ratio -- its annual fee -- is 0.65%, which is considerably lower than most stock mutual funds though a tad higher than many ETFs.
This ETF's performance isn't ready for prime time yet, as the fund is just over a year old and has had a lousy time of it so far, which is consistent with how shipping stocks have done lately. It's also still quite small, with roughly $33 million in assets. You might want to just keep it on your radar, or consider it for investment now. 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 28%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Some of this ETF's components helped the ETF out over the past year. Alexander & Baldwin (NYSE: ALEX ) , for example, gained about 17%, partly on excitement when renowned hedge fund manager Bill Ackman bought a big chunk of the company. The company also owns a lot of valuable land in Hawaii.
But many other companies hurt the ETF, although they could have a more positive effect in the years to come. Frontline (NYSE: FRO ) shed a whopping 83% over the past year, for example, while Ship Finance International (NYSE: SFL ) fell 28% and Nordic American Tankers (NYSE: NAT ) dropped 45%.
The industry has been whacked by an oversupply of containers and insufficient demolition of old tankers, but some industry insiders are bullish now, thinking the worst is over. Others, such as my colleague Adam Crawford, think the shippers may not be done dropping for a while, and advocate focusing on the strongest ones, such as Diana Shipping (NYSE: DSX ) .
The big picture
Demand for shipping isn't going away anytime soon, though it can vary by economic cycle. 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.
Learn about the best dividend ETFs. And if you're looking for some great investments beyond ETFs, consider these 10 Stocks for Your Retirement Portfolio.
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