Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect materials companies to start doing better as our global economic recovery builds steam, and you also want to focus on small caps because of their growth potential, the PowerShares S&P Small-Cap Materials ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is a low 0.31%. The fund is fairly small, though, 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 have enough of a track record to assess yet, as it's very young. It underperformed its benchmark in 2011, and is slightly outperforming it so far this year. 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 17%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Few small materials companies (not to mention big ones) had strong performances over the past year. Still, many could see their fortunes change in the coming years.
RTI International Metals
The big picture
Demand for basic materials 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.
If you're more interested in gold than titanium or steel, check out our special free report, "The Tiny Gold Stock Digging Up Massive Profits," for a compelling candidate for your portfolio.
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. Motley Fool newsletter services have recommended buying shares of Balchem. The Motley Fool has a disclosure policy.