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Make Money in Banks the Easy Way

Selena Maranjian
July 18, 2011

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the financial services industry to thrive as it emerges from recent years' scandals and reforms and as the global economy eventually heats up, the Financial Select Sector SPDR (NYSE: XLF  ) ETF 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 several dozen of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The financial ETF's expense ratio -- its annual fee -- is a very low 0.20%.

As you'd expect after the financial crisis, this ETF has not performed well in the recent past, outgunned by the S&P 500 over the past three, five, and 10 years. Still, the future is what matters, and banks are getting stronger again, and may deliver solid performances in coming years. 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?
Several of this ETF's components made strong contributions to its performance over the past year. American Express (NYSE: AXP  ) , for example, gained 27%, and has been striking out in some new directions, such as joining smaller contenders Green Dot (Nasdaq: GDOT) and