Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you like the idea of investing in patent-rich companies with significant growth potential, the Guggenheim Ocean Tomo Growth Index ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The patent ETF's expense ratio -- its annual fee -- is 0.65%. That's a bit higher than many ETFs, but also considerably lower than most stock mutual funds. The ETF is 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 reasonably, 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 years, and is ahead of it so far this year. 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 very low turnover rate of 6%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several patent-rich companies had strong performances over the past year. Elan
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Ford
The big picture
Patents can be powerful assets, paving the way for innovative (and potentially lucrative) new products and even sometimes simply generating licensing revenue. 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 Ford Motor, 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 Ford. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals and Ford, as well as creating a synthetic long position in Ford.
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