Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you want some undervalued small-caps in your portfolio because of their great potential to grow, the Vanguard Small Cap Value ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.21%. (Vanguard is known for its low fees.)
This ETF has performed reasonably well, outperforming its benchmark over the past three years, and roughly matching it over the past five. 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 low turnover rate of 30%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Plenty of small-cap companies had strong performances over the past year. Consider RPM International
Private equity and venture capital specialist American Capital
Other companies didn't do as well last year, but could see their fortunes change in the coming years. E*TRADE Financial
First Niagara Financial
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.
If you're looking for investments with huge potential, check out our special free report, Discover the Next Rule-Breaking Multibagger. It profiles a promising stock in the health-care arena.