Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the natural gas industry to thrive as a plentiful alternative to oil, the First Trust ISE-Revere Natural Gas Index (NYSE: FCG) 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 lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The natural gas ETF's expense ratio -- its annual fee -- is a relatively low 0.60%.

This ETF has performed reasonably, but it's also very young, with just three full years on the books. It lost to the market in 2008, and then roared back in 2009, and lagged it a bit last year. 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 25%, 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. SandRidge Energy (NYSE: SD), for example, gained 63% on a big jump in revenue, though its steep debt-to-equity ratio leaves many investors wary these days.

Chesapeake Energy (NYSE: CHK) advanced 26%. Its lavishly compensated CEO has drawn criticisms, but the company remains dominant in the industry, growing revenue and paying down debt.

McMoRan Exploration (NYSE: MMR) increased 34% over the past year, and while its revenue hasn't grown much lately, the company sits on sizable gas reserves and specializes in deep drilling from shallow waters.

Other companies didn't add much to the ETF's returns last year, but they could have an effect in the years to come. EnCana (NYSE: ECA), for example, lost 6%, but holds considerable promise, partly thanks to a $5.4 billion deal with PetroChina (NYSE: PTR) to develop gas reserves in China.

The big picture
Demand for natural gas 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.

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 ."

Longtime Fool contributor Selena Maranjian owns shares of Chesapeake Energy, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. Try any of our Foolish 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 has a disclosure policy.