Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect biotech companies and those involved in genome research to thrive over time as our aging population's medical needs grow, the PowerShares Dynamic Biotech & Genome ETF
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The biotech and genome ETF's expense ratio -- its annual fee -- is 0.63%.
This ETF has performed reasonably, underperforming the S&P 500, on average, over the past three years, but beating it over the past five. 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. The fund is relatively small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
What's in it?
Many companies in this industry had strong performances over the past year. Amylin Pharmaceuticals
Incyte
Other companies didn't do as well last year, but they could see their fortunes change in the coming years. Vertex Pharmaceuticals
Then there's Nektar Therapeutics
The big picture
Demand for new drugs and medical treatments isn't going away any time 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.
Learn about the 5 ETFs That Could Soar in 2012. And if you're looking for some great investments beyond ETFs, consider these 12 Dividend Stocks for 2012.