Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the biotechnology industry to thrive over time as our global population grows, gets older, and needs more health care, the First Trust NYSE Arca Biotech Index ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF's expense ratio -- its annual fee -- is 0.60%. The fund is on the small side, too, so if you're thinking of buying, beware of potentially large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed well, outperforming the world market over the past three and five years. 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 biotech companies had strong performances over the past year. Amylin Pharmaceuticals
But plenty of other biotech companies didn't do as well last year -- and they serve as a painful reminder of why it can be good to diversify your money across a handful of biotech companies instead of betting the farm on just one or two.
Human Genome Sciences
The big picture
Demand for biotechnology 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 looking for investments with huge potential, check out our special free report: "Discover the Next Rule-Breaking Multibagger." It profiles a promising stock in the health-care arena.
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. The Motley Fool owns shares of Dendreon. Motley Fool newsletter services have recommended buying shares of Coventry Health Care. The Motley Fool has a disclosure policy.