Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the biotech sector to thrive over time as our global population ages and demands more medical treatments, the Market Vectors Biotech ETF (AMEX: BBH) 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.

If you're familiar with ETFs and think that the BBH ticker looks familiar, but the fund's name doesn't, you're right. This ETF is one of several replacing Merrill Lynch-based HOLDRs which had some problems that these funds don't.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Market Vectors ETF's expense ratio -- its annual fee -- is a low 0.35%.

This ETF doesn't have much of a performance record yet, as it's just a few weeks old. It's relatively small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. You might want to just keep an eye on it as it matures a bit, or you might want to be an early investor. Remember that as with most investments, 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 the companies this ETF includes performed well over the past year. Regeneron Pharmaceuticals surged 137%, for example, buoyed by a huge revenue jump with the successful launch of its age-related macular degeneration drug, Eylea.

Other companies didn't do as well, but could see improvement in the years to come. Amylin Pharmaceuticals (Nasdaq: AMLN) shed 21%, partly on news that it would end its partnership with Eli Lilly, thus leaving it with higher costs to bear for its diabetes drugs.

Dendreon (Nasdaq: DNDN) fell 61%, having had a tough year when it first couldn't meet demand for its new prostate cancer drug, Provenge, and then found that demand wasn't as high as expected due to the product's high price tag. Fellow ETF holding Exelixis (Nasdaq: EXEL), down 31%, has its own prostate treatment in development -- cabozantinib. Bulls are optimistic about its chances for ultimate approval, but if the drug fails, it will be a big blow to the stock.

Human Genome Sciences (Nasdaq: HGSI), down 65%, suffered a fate similar to Dendreon's for a similar reason. Demand for its lupus drug Benlysta wasn't quite as high as expected, and the medication's $35,000 price tag might have something to do with that. Still, the drug should ultimately sell well, as it has no competitors and there has been no new lupus treatment in decades. Some speculate, too, that the company may be bought out by its marketing partner, GlaxoSmithKline.

The big picture
Biotechnology can be a volatile arena, with companies surging or plunging as their products try to pass approval hurdles and succeed in the market. But demand for biotechnology's goods 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 5 ETFs That Could Soar in 2012. And if you're looking for some great investments beyond ETFs, consider these 12 Dividend Stocks for 2012.

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 Dendreon and Exelixis. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline and Exelixis. 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.