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, ages, and develops medical conditions needing treatment, the SPDR S&P Pharmaceuticals ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The pharmaceuticals ETF's expense ratio -- its annual fee -- is a relatively low 0.35%. The fund is somewhat small, too, so if you're thinking of buying, beware of possible large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed well, beating the S&P 500, on average, over the past three- and five-year periods. 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 pharmaceutical companies had strong performances over the past year. Strong is sometimes too mild a word, though, as VIVUS
President Obama has called for increased spending on developing treatments for Alzheimer's disease, and that could benefit Eli Lilly
Other companies didn't do as well last year but could see their fortunes change in years to come. Hospira
The big picture
Demand for pharmaceuticals 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.
Editor's note: A previous version of this article referred to plant shutdowns that Hospira has suffered in the past. The Fool regrets any implication that these shutdowns were still ongoing.
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, holds no position in any company mentioned. Click here to see her holdings and a short bio. 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.