Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some Internet-focused stocks to your portfolio, but don't have the time or expertise to handpick a few, the First Trust Dow Jones Internet Index ETF (NYSEMKT:FDN) 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 lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF's expense ratio --- its annual fee -- is 0.60%.
This ETF has performed well, handily beating the world market 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.
Why Internet-focused stocks?
The Internet doesn't seem to be going away anytime soon, and plenty of companies are demonstrating that there's good money to be made there. More than a handful of Internet-focused companies had strong performances over the past year. Akamai Technologies (NASDAQ:AKAM) surged 49%, and still seems reasonably-to-attractively valued. The company delivers much of the Internet's content, and stands to benefit from newly developing "couch commerce." Some worry that strong competition might lead to it lowering its prices, but that might bring in more customers, too. Its first quarter's results topped expectations.
Networking solutions company Juniper Networks (NYSE:JNPR) jumped 43%, and is poised to profit along with fiber-optic companies as demand grows. It's also been mentioned as a possible takeover target. Big telecom companies are expected to boost their capital expenditures, which would deliver dollars to Juniper. Some see its bigger competitor Cisco Systems as the better bargain, but Juniper is nimbler.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Big Data operator TIBCO Software (UNKNOWN:TIBX.DL) sank 12%, while it has been adding recurring-revenue contracts. Of all things, staffing might be an issue for the company, though my colleague Anders Bylund remains a "committed owner," seeing its competitors having trouble competing with it. The company has been restructuring, with bulls hoping for improved performance.
Rackspace Hosting (NYSE:RAX) shed 6% over the past year, but close to 50% year to date. The cloud specialist has been facing tough competition from the likes of Amazon.com, which recently lowered its prices. Rackspace's last quarter was disappointing, but its price drop has increased bulls' interest in it, with some hopeful about its new sales chief.
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, owns shares of Amazon.com. The Motley Fool recommends Amazon.com, Cisco Systems, Rackspace Hosting, and Tibco Software. The Motley Fool owns shares of Amazon.com. 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.