Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the banking industry to gain in value significantly as it continues digging out from its credit-crisis mess, the Financial Select Sector SPDR ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The financial ETF's expense ratio -- its annual fee -- is a very low 0.18%.
This ETF has performed … well, badly. It has underperformed the world index over the past three, five, and 10 years -- though it's significantly ahead of that so far this year. It's the ETF's expected future performance that counts the most, though. And 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 very low turnover rate of 7%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several financial companies had strong performances over the past year. BB&T
Other companies didn't do as well last year but could see their fortunes change in the coming years. Bank of America
Meanwhile, life-insurance giant Prudential Financial
Custodial giant Bank of New York Mellon
The big picture
Demand for financial services 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.
The banking sector might still look like a mess, but it's nevertheless drawing the interest of some of the most successful investors, such as Warren Buffett. Check out our special free report, "The Stocks Only the Smartest Investors Are Buying," to be introduced to some compelling financial stocks.