Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add a bunch of mid-cap companies to your portfolio because they're more proven than small caps and have more room to grow than most large caps, the Vanguard Mid-Cap ETF (NYSE: VO) 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 Vanguard ETF's expense ratio -- its annual fee -- is an ultra-low 0.10%. (Vanguard is known for low fees.)

This ETF has performed rather well, beating the S&P 500 over the past three years and inching ahead of 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.

With a low turnover rate of 22%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Plenty of mid-cap companies had strong performances over the past year. Alexion Pharmaceuticals (Nasdaq: ALXN), for example, surged 114%. It's a biotech company that focuses on rare diseases, with its Soliris drug selling well as it treats paroxysmal nocturnal hemoglobinuria (a cause of anemia) and atypical hemolytic uremic syndrome. The problem, though, is that Soliris is the company's only FDA-approved drug, and while it's competition-free for at least another two years or so, it's risky to have so much riding on one such product.

A fertilizer company with a lot going for it, CF Industries (NYSE: CF) gained 33%. It has made a misstep or two in recent history, but sports strong financials and a great track record of growth. It's poised to benefit from continued nitrogen demand and an expected boom in corn, as well as from the likely strong demand of populous nations such as India and China.

Seagate Technology (Nasdaq: STX), a hard-drive specialist, advanced 65% as it overcame supply interruptions from flooded Thailand and has been merrily meeting demand while enjoying strong profit margins. Also auspicious is the company's being added to the S&P 500 index. It does face competition, but as CFO Patrick O'Malley recently said in an interview, the company has gone from having 91 disk-drive competitors in 1988 to just two now.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Memory giant SanDisk (Nasdaq: SNDK) shed 10%, partly due to an inventory glut in its industry and to its posting disappointing earnings recently. There's hope, though, as supply and demand are expected by some to balance out soon.

The big picture
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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