Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the gaming industry to grow as the global economy eventually recovers and to generate income in the interim as desperate people take desperate chances, the Market Vectors Gaming ETF (NYS: BJK) 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 do. The gaming ETF's expense ratio -- its annual fee -- is a not-astronomic 0.65%. That's higher than many ETFs, but it's considerably lower than most stock mutual funds.
This ETF has performed well, but it's also very young, with just a few years on the books. Over the past three years it has outperformed the S&P 500 and international MSCI EAFE index handily. 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 11%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Melco Crown Entertainment (NAS: MPEL) surged 180% over the past year, thanks in part to successful casino properties in Macau. But it took a hit in August along with fellow casino operator MGM Resorts (NYS: MGM) , as some are worrying about the industry's prospects in our continuing economic slump. Las Vegas Sands (NYS: LVS) , a 49% gainer, saw less of a slip, along with Wynn Resorts (NAS: WYNN) .
Las Vegas Sands is on an upswing recently, though, as it makes investors smile by redeeming some of its preferred stock, thereby deleveraging the company. High debt loads plague many in the industry and can boost volatility. Strong results from Macau are also lifting it and its peers.
Other companies didn't add as much to the ETF's returns last year but could have an effect in the years to come. International Game Technology (NYS: IGT) lost 4% and has suffered in this economy as casinos haven't been ordering too many slots and other machines. But the company stands to benefit from an eventual economic recovery and has been signing promising deals lately.
The big picture
Demand for gambling venues isn't going to disappear anytime soon. 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.
At the time thisarticle was published ETFs can help you find the way to better investing results. To find some great ETF investing ideas, take a look at The Motley Fool's special free report, "3 ETFs Set to Soar During the Recovery."Longtime Fool contributor Selena Maranjianholds no position in any company mentioned here. Check out herholdings and a short bio. The Motley Fool owns shares of International Game Technology. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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