Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the auto industry to thrive over time as our growing global population demands wheels, and especially as we work our way out of our recent economic slowdown, the First Trust Nasdaq Global Auto Index ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF's expense ratio -- its annual fee -- is 0.70%. 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 is too new to have a sufficient track record to assess. It's the future that matters most, though, and what you expect from the industry. 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 16%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
More than a handful of automotive companies had strong performances over the past year. Harley-Davidson
Electric-car maker Tesla
Ford, meanwhile, has streamlined its offerings globally and has posted a dozen profitable quarters, while boosting its vehicles' quality. Its efforts to simplify production should lead to bigger profit margins and improved vehicles.
The big picture
Demand for automobiles 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.