Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the basic materials industry to thrive as the world's economies eventually recover and construction projects proliferate, the PowerShares Dynamic Basic Materials ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is 0.60%. 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 has performed rather 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?
Many companies in this industry had a rough time over the past year. Coal and iron ore miner Cliffs Natural Resources
Also looking attractive at recent levels is Freeport McMoRan
Some basic materials companies did well, though. Newly public fertilizer company Rentech Nitrogen Partners LP
The big picture
Long-term 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.
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Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, holds no position in any company mentioned. Check out her holdings and a short bio. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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