Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the software industry to thrive as more and more people use technology in many areas of their lives, the iShares S&P North American Tech-Software ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.48%.
This ETF has performed well, beating the S&P 500 (INDEX: ^GSPC), on average, over the past three, five, and 10 years. 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 18%, 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. Speech-software specialist Nuance Communications
Cadence Design Systems
Other companies didn't add as much to the ETF's returns last year but could have an effect in the years to come. Design software specialist Autodesk
The big picture
Demand for software isn't going away anytime soon. 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.