Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the pharmaceutical industry to thrive as the world's growing population ages, the SPDR S&P Pharmaceuticals
ETFs often sport lower expense ratios than their mutual fund cousins. The Medical Devices ETF's expense ratio -- its annual fee -- is a low 0.35%.
This ETF has performed reasonably, but it's also very young, with just four years on the books. It underperformed the S&P 500 in 2007, but has topped it in each of the past three years. 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 moderate turnover rate of 47%, this fund isn't frantically 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. AVANIR Pharmaceuticals
Other companies hurt the ETF's returns last year, but could have a more positive impact in the years to come. Vivus
The big picture
Demand for pharmaceuticals won't go away anytime soon. A well-chosen ETF can grant you instant diversification across the industry -- and make investing in and profiting from the sector that much easier.
Keep your eye on these investments by adding them to your watchlist:
- Add SPDR S&P Pharmaceuticals ETF to My Watchlist.
- Add AVANIR Pharmaceuticals to My Watchlist.
- Add Jazz Pharmaceuticals to My Watchlist.
- Add Questcor Pharmaceuticals to My Watchlist.
- Add Vivus to My Watchlist.
- Add Nektar Therapeutics to My Watchlist.
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 ."
Editor's Note: A previous version of this article incorrectly attributed Nektar's stock performance to the drug Exubera. The Fool regrets the error.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Try any of our investing newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is Fools writing for Fools.