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 our global population grows and ages, the iShares Dow Jones US Pharmaceuticals ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The pharma ETF's expense ratio -- its annual fee -- is a relatively low 0.47%.
This ETF has performed well, but it's also fairly young, with just about five years on the books. It trounced the S&P 500 (INDEX: ^GSPC) over the past one, 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 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. Ariad Pharmaceuticals
Other companies didn't add as much to the ETF's returns last year, but could have an effect in the years to come. Abbott Labs
The big picture
Demand for medications 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.
Longtime Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories. 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.