Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the aerospace and defense industry to prosper over the long run due to the seeming inevitability of air travel and wars, the PowerShares Aerospace & Defense ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is 0.60%. The fund is very 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.
This ETF has performed reasonably, beating the world markets by a modest margin over the past three and five 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 a low turnover rate of 12%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
This industry is facing some uncertainty, as our nation's financial troubles are leading to cuts in defense spending. Thus, lots of aerospace and defense companies didn't post impressive performances over the past year. (Fortunately, their fortunes may well change in the coming years.)
Aerospace and defense parts supplier Esterline Technologies
Industry behemoth Boeing
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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