Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some retail stocks to your portfolio but don't have the time or expertise to hand-pick a few, the SPDR S&P Retail ETF (XRT -0.40%) could save you a lot of trouble. Instead of trying to figure out which retail stocks 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. This ETF, focused on retail stocks, sports a relatively low expense ratio -- an annual fee -- of 0.35%.

This ETF has trounced the world market 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.

Why retail stocks?
Retail stocks can be somewhat cyclical, with many retailers suffering during prolonged economic slumps. But others prosper during such times, as many consumer goods purchases can't be put off. (Think, for example, of shampoo, groceries, and school notebooks.) And right now is a promising time, as our economy is recovering.

More than a handful of retail stocks had strong performances over the past year. Rite Aid (RAD -59.68%), rather surprisingly, soared 366%. Not so long ago, its ability to survive was in question, but it has been posting profits and giving shareholders a wild ride. Its top line isn't growing briskly, though, and its rivals sport stronger numbers -- and dividends, too. Bulls believe that if Rite Aid can improve its performance, such as profit margins, its future can be rosy. Others see its rivals as better buys.

Walgreen (WBA -0.93%) is one of those healthier-than-Rite-Aid rivals. It surged 78% over the past year, with a growing dividend that recently yielded 2.1%. (And I mean really growing -- over the past five years, its average annual dividend growth has topped 20%.) Bulls laud its aggressive transformation, featuring smart partnerships and expanded private-label sales. Walgreen has invested heavily in international growth, via a purchase of Europe-based Alliance Boots. It has also entered into a promising alliance with U.S. drug wholesaler AmerisourceBergen that strengthens it globally. In its last quarter, revenue grew 5%, and earnings popped by 76%. Its stock isn't quite a bargain at recent levels, but Walgreen's prospects are solid, thanks in part to Obamacare.

Best Buy (BBY 1.06%), like Rite Aid, has also surprised many, having tripled over the past year as it executed an impressive turnaround. Its new CEO has been cutting costs and making the company more competitive. Bulls like its innovation and growing online sales, but bears worry about competition from Amazon.com and find the stock's valuation a bit too rich lately. Still, analysts at Goldman Sachs recently upped their price target for Best Buy by 27%, from $37 to $47.

Tractor Supply (TSCO 2.33%) gained 52%, and has averaged annual growth of nearly 30% over the past 15 years. It has built up a network of more than 1,200 stores and has profited from growth in agriculture, rising crop prices, and even from recreational farmers. Its profit margins have been growing, helped in part by private-label brands. Tractor Supply recently split its stock 2-for-1, but that's not as meaningful as it may seem, serving mainly to lower its share price for interested investors.

The big picture
Consider adding retail stocks to your portfolio. 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.