Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the semiconductor industry to thrive as the global economy recovers and manufacturing heats up again, the iShares PHLX SOX Semiconductor (Nasdaq: SOXX) ETF 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 several dozen of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The semiconductor ETF's expense ratio -- its annual fee -- is a relatively low 0.48%.

This ETF's performance may seem worrisomely volatile. It lost roughly half its value both in 2002 and in 2008, but then gained 81% and 75%, respectively, in the years following those declines. Much of that is due to the semiconductor industry being cyclical. When our overall economy is slumping, so does its business. As with most investments, 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 25%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Altera (Nasdaq: ALTR), for example, advanced 74% in the last year, growing earnings strongly as it rolls out newer and better programmable logic devices (PLDs). NVIDIA (Nasdaq: NVDA), meanwhile, gained 38%, spending generously on research and development and pushing into mobile communications technology.

Other companies hurt the ETF's returns last year, but could have a more positive effect in the years to come. Cree (Nasdaq: CREE) dropped 49% on flagging demand for its LED technology, as well as price wars with competitors such as General Electric (NYSE: GE) and Philips Electronics (NYSE: PHG)Micron Technology (Nasdaq: MU) lost 16% over the past year as a temporary blip up in demand for its memory chips has given way to more investor pessimism. 

The big picture
Demand for semiconductors isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across the industry -- and make investing in and profiting from the sector that much easier.

ETFs can help you find the way to better investing results. To find some great ETF investing ideas, take a look at The Motley Fool's special free report, "3 ETFs Set to Soar During the Recovery."

Longtime Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of and writing puts in NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.