Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like some exposure to small-cap companies because of their great potential and ability to grow briskly, the SPDR S&P 600 Small Cap ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The SPDR ETF's expense ratio -- its annual fee -- is a very low 0.20%. It's 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, but it's also very young, with just a few years on the books. It outperformed the S&P 500, on average, 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?
Lots of small-cap companies had strong performances over the past year. Questcor Pharmaceuticals
Other companies didn't do quite as well last year, but they could have better returns in the years to come. Energy equipment supplier Lufkin Industries
The big picture
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.
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter @SelenaMaranjian, holds no position in any company mentioned. Click here to see her holdings and a short bio. 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.
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