Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you're interested in investing in utility companies because you see demand for energy and communication growing over time and you like the sturdiness of the industry, the Guggenheim S&P 500 Equal Weight Utilities ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The utility ETF's expense ratio -- its annual fee -- is a relatively low 0.50%. An interesting detail about this particular ETF is that it holds its components in equal proportion, instead of weighting them by market cap, as is often done. The ETF is fairly 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 doesn't sport the best performance, lagging the S&P 500 over the past three and five years. It did fare well during that time compared to its utility peers, though. 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.
With a low turnover rate of 15%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
The huge electric company Southern
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Telecom CenturyLink
Yielding about 4%, electric utility Exelon
Wireless provider Sprint-Nextel
The big picture
Demand for energy and telecommunication services isn't going away any time 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.
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Google, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google, Southern, and Exelon, as well as writing a covered strangle position in Exelon. The Motley Fool has a disclosure policy.