Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you want to invest in some small financial companies, for example, expecting the financial industry to thrive over the long run due to our need for its services, the PowerShares S&P SmallCap Financials ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is a very low 0.29%. The fund is very small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed well, beating the world market over the past year, but it's also too young to draw many conclusions about. 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 13%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several small financial companies had strong performances over the past year. Prospect Capital
The fourth-largest bank in Pennsylvania, Susquehanna Bancshares
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Medical Properties Trust
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.
If you're hankering for some financial stocks, check out our special free report, "The Stocks Only the Smartest Investors Are Buying," which will introduce you to a promising regional bank -- and some other compelling financial companies, as well.