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
The basics
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
Jazz Pharmaceuticals
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.
Learn about the 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.
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.