Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the semiconductor industry to thrive as consumers businesses continue to embrace and demand new electronic goods, the SPDR S&P Semiconductor ETF (NYSE: XSD) 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 semiconductor ETF's expense ratio -- its annual fee -- is a relatively low 0.35%.

This ETF has performed reasonably well, crushing the S&P 500 over the past three years but modestly underperforming it since 2006, 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.

What's in it?
Several of this ETF's components have made strong contributions to its performance so far in 2011. NetLogic is up 57% so far for the year.

Cypress Semiconductor (Nasdaq: CY), up 31%, has been reporting blowout earnings growth, partly on its touchscreens for mobile devices and tablets. Revenue from its emerging-technologies division topped $10 billion recently, too, boding well.

Other companies haven't added as much to the ETF's returns this year but could have an effect in the years to come. Audio-chip specialist Cirrus Logic (Nasdaq: CRUS) is off 5%, even though many observers are delighted that the company is supplying its technology for Apple devices. That can be a double-edged sword, though, with companies such as Cirrus and OmniVision (Nasdaq: OVTI) very linked to the success of Apple products.

Home-networking chipmaker Entropic Communications (Nasdaq: ENTR) shed some 61%, as home networking isn't growing quite as briskly as expected, evidenced in part by Corning's (NYSE: GLW) lowering of expectations for sales of LCD TVs, which often offer connectivity. Still, it has new products in the works, some developed jointly with partners such as Zoran and Zenverge.

Licensing concern Rambus (Nasdaq: RMBS) sank about 61%, as it was hoping to receive as much as several billion dollars if it prevailed in a legal disagreement with Micron (Nasdaq: MU), but that decision seems to have gone Micron's way, at least for now. But Rambus appears to have a promising deal struck with an unnamed smartphone maker that could help it recover.

The big picture
Demand for semiconductors 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.

Learn about the best dividend ETFs. And if you're looking for some great investments beyond ETFs, consider these 10 Stocks for Your Retirement Portfolio.

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.