Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you respect the power of dividends, the Vanguard Dividend Appreciation ETF (NYSE: VIG) 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 Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.18%. Its dividend yield was recently 2.1%.

This ETF has performed reasonably well, beating the S&P 500 over the past three and five years, on average. As with most investments, of course, 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 15%, 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. Caterpillar (NYSE: CAT) gained about 35% over the past year, and has recently been reporting strong growth and profits. Its acquisition of Bucyrus International should help it better serve the mining industry, and it's building its business in Asia, too, where developing nations such as China are busy shoring up their infrastructure. Walgreen (NYSE: WAG), up 28% over the past year, has been posting big income gains, though some aren't thrilled with how the company hasn't been playing nicely with CVS Caremark (NYSE: CVS), and Express Scripts.

Other companies didn't add quite as much to the ETF's returns last year, but could have an effect in the years to come. United Technologies (NYSE: UTX), for example, gained 5% over the past year, and with some 650 airplane orders on the horizon, those who don't want to guess how they'll get split up between Boeing (NYSE: BA) and Airbus are looking at United Technologies as a definite beneficiary.

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

ETFs can help you find the way to better investing results. To discover great ETF investing ideas, take a look at The Motley Fool's special free report, " 3 ETFs Set to Soar During the Recovery ."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.