Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to invest in the stock market's largest companies, the Rydex Russell 1000 Equal Weight ETF
The ETF tracks the Russell 1000 index, which features about 1,000 large-cap companies, thereby going well beyond the S&P 500's 500-company range. It goes another step further, too. While many indexes portion their holdings according to market capitalization, with the largest companies making up more of the index's value, this ETF is equal-weighted in a particular way. Each industry within it receives equal weighting, and then its components are equally weighted, as well. The end result is that the component companies can have very different weightings, but no industry overshadows others or is underrepresented.
ETFs often sport lower expense ratios than their mutual fund cousins. The Rydex ETF's expense ratio -- its annual fee -- is a relatively low 0.4%. The fund is relatively 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 have much of a performance to assess, as it's extremely young. Year-to-date, it's ahead of the S&P 500, but 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?
Plenty of large companies had strong performances over the past year. Green Mountain Coffee Roasters
Advancing 27% was tobacco giant Altria
Level 3 Communications
Other companies didn't do as well last year but could see their fortunes change in the coming years. Consider Dendreon
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, owns shares of Starbucks, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio.
The Motley Fool owns shares of Altria Group, Philip Morris International, Dendreon, and Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks, Philip Morris International, and Green Mountain Coffee Roasters, as well as writing covered calls in Starbucks and creating a lurking gator position in Green Mountain Coffee Roasters.
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