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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the consumer goods industry to thrive over time, the iShares Dow Jones US Consumer Goods (NYSE: IYK ) 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.
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.47%. (It sports a dividend yield near 2%, as well.)
This ETF has performed rather well, beating the world market over the past three, five, and 10 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 6%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Plenty of consumer goods companies had strong performances over the past year. Tobacco giants Altria (NYSE: MO ) and its non-U.S.-focused cousin Philip Morris International (NYSE: PM ) , for example, surged 45% and 35%, respectively. Altria's believers like its strong dividend history, its growing smokeless tobacco business, and its stake in beverage giant SAB Miller. Detractors point to factors that make Philip Morris look more attractive, such as America's shrinking base of smokers, due in part to increasing regulation of the industry and higher taxes driving up prices. Competition from discount brands is also a concern. Altria recently yielded 4.6%, while Philip Morris yielded 3.4%.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Ford (NYSE: F ) , for example, sank by 23%, as its fleet sales took a hit. Trouble in Europe has also put pressure on the company. Still, its future looks bright, as it develops promising new models and invests aggressively in faster-growing economies abroad.
Johnson Controls (NYSE: JCI ) , down 31%, may not be a household name, but many of its offerings reside in garages and driveways across America, as it supplies the auto industry. The company has cited weak battery sales lately, as Americans have been hanging on to cars longer before buying new ones. The company sports a dividend yield of about 2.9%, and has been paying dividends since 1887!
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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