Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the alternative energy industry to thrive as we continue to try and reduce our dependence on fossil fuels, the Market Vectors Global Alternative Energy ETF (NYSE: GEX) 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 Market Vectors ETF's expense ratio -- its annual fee -- is 0.62%. The fund is very small, too, so if you're thinking of buying, beware of potentially large spreads between its bid and ask prices. Consider using a limit order if you want to buy in. It recently yielded about 3.6% in dividends, too.

This ETF has performed... well, poorly, losing badly to the world market over the past three and five years -- and also so far this year. It's the future that counts the most, though, and some see many of the ETF's beaten-down components as now being attractively priced. 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 26%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Some alternative energy companies had strong performances over the past year. Clean Energy Fuels (Nasdaq: CLNE), for example, surged 18%, with many investors excited about its natural-gas fueling stations, seeing the relatively low price of gas as likely to boost interest in natural-gas fleets. But building gobs of stations will be costly, and the company has been operating in the red lately. Many commercial vehicle fleets have been converting to natural gas, but it remains to be seen whether the consumer market will take to it. The low price of natural gas isn't likely to last forever, either.

But a lot of companies didn't do as well last year, though they could see their fortunes change in the coming years. First Solar (Nasdaq: FSLR) plunged 76%, facing tough competition, supply and-demand issues, threatened government subsidies, and ever-changing technologies. On the bright side, though, it recently posted very strong results after a string of ugly quarters.

Fellow solar concern GT Advanced Technologies (Nasdaq: GTAT) sank 37%, but its emerging HiCz technology should make solar even more efficient and cost effective. The stock recently popped more than 10% when a Wall Street analyst suggested that its technology might have a place in smartphones, which are exploding in popularity. Unlike some of its peers, it has remained profitable in recent years.

MEMC Electronic Materials (NYSE: WFR) (WFR... wafer... get it?) shrunk by about 52% over the past year, but it recently reported very strong results, featuring a big uptick in solar project sales. The second-largest U.S. polysilicon maker's semiconductor business saw volume grow, but prices fell, delivering a net drop in revenue. Look before you leap, though, as folks were recently wondering whether the company would end up in bankruptcy. Perhaps wait for a little more good news.

The big picture
Demand for alternative energy 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.

Solar energy has a long road ahead, but the fundamentals of the industry are improving and the companies that survive have a huge opportunity. To see just how big the opportunity is for First Solar, check out our detailed report on the company. It can only be found here.