Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect big banks to grow in value in the coming years, the SPDR KBW Bank
ETFs often sport lower expense ratios than their mutual fund cousins. The SPDR KBW ETF's expense ratio -- its annual fee -- is a relatively low 0.35%.
This ETF doesn't have the best record, but then again, the past few years have dragged most bank stocks into the gutter at some point. But that won't last forever, and many investors consider big-bank stocks significantly undervalued. According to Morningstar, the price-to-cash-flow and price-to-book-value multiples of the stocks the ETF owns are both well below the S&P's average. And in 2010, the ETF outpaced both its category and the S&P 500 by around 8 percentage points.
With a low turnover rate of 18%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do. That'll give its holdings a better chance to perform.
What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Huntington Bancshares
Bigger banks in the ETF are also attractive. My colleague Alex Dumortier recently named Citigroup
The SPDR KBW Bank ETF isn't the only ETF that focuses on the financial sector. But its heavy focus on the biggest banks makes it particularly intriguing these days.
The big picture
A well-chosen ETF can grant you instant diversification across an industry -- and make investing in and profiting from the sector that much easier.
ETFs can help you find the way to better investing results. To find some great ETF investing ideas, take a look at The Motley Fool's special free report, " 3 ETFs Set to Soar During the Recovery ."
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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. The Fool owns shares of Wells Fargo. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.