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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some transportation stocks to your portfolio, the iShares Dow Jones Transportation Average ETF (NYSEMKT: IYT  ) 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 iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.47%.

This ETF has performed well, beating 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 transportation?
Transportation is something of a staple, as we'll always need to move ourselves and other things here and there. Better still, our global economies are starting to pick up, which means that companies will be shipping more products, boosting the industry.

More than a handful of transportation companies had strong performances over the past year. Norfolk Southern (NYSE: NSC  ) surged 20%, recently hitting a 52-week high. It yields 2.6%, and has hiked its payout by an annual average of more than 11% over the past five years. Like other railroads, it's been hit by lower coal volumes, as low natural gas prices have led to shrinking coal demand. It's positioning itself for the future, though, investing heavily in capital projects.

CSX (NASDAQ: CSX  ) , another railroad company, rolled ahead 17%. It, too, has been whacked by weakness in coal, but coal is likely to remain in demand internationally, and coal exports have been increasing. CSX is geographically well positioned to benefit from such exports, with its access to Eastern and Gulf Coast ports. The stock recently yielded 2.3%, and it has been aggressively upping its payout.

United Parcel Service (NYSE: UPS  ) delivered a 9% gain and yields 2.9%. The delivery giant has seen its performance falter, in part due to massive pension-related write-offs. It also recently agreed to fork over a $40 million settlement in relation to an investigation into packages it delivered for illegal online pharmacies. (The packages it delivers for legitimate online businesses, such as and eBay, though, have contributed significantly to its growth.) Meanwhile, the company has committed to hiring 25,000 veterans, and it stands to benefit if Congress continues hobbling the Post Office.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Expeditors International (NASDAQ: EXPD  ) shed 22%, serving transportation companies with its logistics services. In its fourth-quarter earnings report, the company posted disappointing results due to a weak air freight market. Bulls admire its expertise, organic growth, and global reach, but bears are irked by its hefty cash pile, which isn't being deployed to boost growth.

The big picture
Demand for transportation 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.

With 21,000 miles of track serving two-thirds of the U.S. population, CSX maintains a valuable proprietary asset. Still, this railroad will face difficult obstacles in the years ahead due to a domestic surplus of natural gas and coal's declining popularity. To help investors better understand how CSX can deal with these challenges, The Motley Fool has released a brand-new premium research report authored by Isaac Pino, Industrials bureau chief and transportation expert. Isaac provides an in-depth look at CSX's competitive advantages, risk areas, and prospects for the future. Simply click here now to access your copy of this invaluable investor's resource.

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