Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the retail industry to grow amid a global economic recovery, the SPDR S&P Retail (NYSE: XRT) 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 retail ETF's expense ratio -- its annual fee -- is a rather low 0.35%.

This ETF has performed well, but it's also very young, with just more than four years on the books. It underperformed the S&P 500 in 2007 and 2008, then beat it by huge margins in 2009 and 2010. As with most investments, 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 26%, 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, although they aren't necessarily what you first think of when you think "retail." Netflix (Nasdaq: NFLX) more than tripled, as its quickly growing subscriber base took to lower-margin video streaming. Beauty specialist Ulta Salon (Nasdaq: ULTA), whose insiders have been buying its shares, more than doubled. Ulta sports around 350 locations now, but aims to have 3,000. (Nasdaq: PCLN) has been another winner, advancing more than 100% thanks to its double-digit growth rates, especially in international revenue.

Other companies didn't add much to the ETF's returns last year, but could have an effect in the years to come. Walgreen (NYSE: WAG) grew by 30% year over year, but that wasn't enough to beat the ETF's overall 40% gain. Fans expect Walgreen to keep growing, though, through innovations such as its own beer and wine brands and expanded grocery offerings. (In addition, as competitor RiteAid (NYSE: RAD) falters, Walgreen stands to gain more market share.)

The ETF holds 64 different securities, and unlike many ETFs, it's not dominated by big companies. Some 42% of its holdings are mid-caps, and 34% small caps, which are typically able to grow faster than large caps. It's also an equal-weighted index, meaning that a smaller operator, such as Ulta, is roughly equal in its influence to a big gun such as Walgreen.

The big picture
Retail can be a cyclical arena, but it's never going away, and in the long run, a basket of retailers should grow in value. A well-chosen ETF can grant you instant diversification across the industry -- and make investing in and profiting from the sector that much easier.

ETFs can help you find the way to better investing results. For great ETF investing ideas, check out The Motley Fool's special free report, " 3 ETFs Set to Soar During the Recovery ."

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Selena Maranjian owns shares of Netflix. Netflix and are Motley Fool Stock Advisor choices. The Fool owns shares of SPDR S&P Retail. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.