Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you're attracted to small-cap stocks because of their great growth potential, the RevenueShares Small Cap ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The RevenueShares ETF's expense ratio -- its annual fee -- is a relatively low 0.54%. (The fund is small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.)
This ETF has performed reasonably well, beating the S&P 500, on average, over the past three years. But it's also very young, with just a few years on the books. It underperformed the S&P 500 in 2008 and 2010, though it beat it substantially in 2007 and 2009. 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?
Plenty of small-cap companies had strong performances over the past year. Outdoor recreation gear retailer Cabela's
Other companies didn't do as well last year but could see their fortunes change in the coming years. Momenta Pharmaceuticals
The big picture
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.
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, holds no position in any company mentioned. Check out her holdings and a short bio. The Motley Fool owns shares of Momenta Pharmaceuticals. Motley Fool newsletter services have recommended buying shares of Cabela's and Momenta Pharmaceuticals. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.