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.