Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the water industry to grow over time, as the world's population keeps rising and demand for clean water increases, the PowerShares Global Water ETF (NYSE: PIO) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The water ETF's expense ratio -- its annual fee -- is 0.75%. That's good; it's higher than that of many ETFs, but also lower than that of the typical stock mutual fund. The fund 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, partly due to struggling economies reining in water infrastructure spending. Over the past three and five years, it underperformed the world markets. 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 26%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Many water-related companies have had a tough time lately. Flowserve (NYSE: FLS) bucked that trend, though, rising 6%. Bulls like its backlog and share repurchases, and they're also hopeful that the activist company Relational Investors might spur the company to make some profit-plumping moves.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Itron (Nasdaq: ITRI) sank 12%, for example, partly on disappointing earnings due to higher-than-expected costs. Some of those costs are really good news, though, reflecting investments in faster-growing economies abroad and in new product development. In the meantime, the company is getting some big orders for its meters from major utility companies in places such as Australia and Turkey. Its sizable free cash flow has helped it pay down a lot of debt, too.

Pentair (NYSE: PNR), down 4%, has been posting rising revenue but negative earnings in recent years. Bulls are hopeful about the company's combining with Tyco's flow control business, and see it as attractively priced, with a forward P/E near 12 and projected growth rates in that range, as well.

Water treatment specialist Pall (NYSE: PLL), meanwhile, shed 3%, recently reporting disappointing earnings -- though gross and net margins grew (while operating margins didn't). The company blamed Europe's slowdown as well as a temporary interruption in its supply chain. It's also not helping that it's a cyclical company in a struggling economic environment.

The big picture
Demand for water 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 not convinced that this is the right time for water stocks to start building your retirement nest egg, check out our special free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks," to learn about some other compelling portfolio contenders.