Make Money in "Pure Growth" Stocks the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you're drawn to mid-cap stocks because they're somewhat proven and yet tend to still have plenty of room for further growth, the Guggenheim S&P Midcap 400 Pure Growth ETF (NYS: RFG) 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. As a plus, it's focused more on companies growing at a respectable clip.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The mid-cap ETF's expense ratio -- its annual fee -- is a relatively low 0.35%.

This ETF has performed rather well in its somewhat young life, handily outperforming the S&P 500 over the past three and five years, on average -- and so far this year, as well. 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 mid-cap growers had strong performances over the past year. Regeneron Pharmaceuticals (NAS: REGN) shot up 188%, partly on news that an FDA panel supported continued testing of some drugs that had been on a clinical hold. Even before that, though, the company upped its expectations in a big way -- so that now some see the stock as having gotten ahead of itself.

Monster Beverage (NAS: MNST) gained 116%. The stock formerly known as Hansen Natural has been turning in strong numbers and continues to innovate -- introducing a concentrated energy drink, for example. Energy drinks are a briskly growing niche, and Monster is a key player. Its success has some speculating that it may be taken over, though that wouldn't be an inexpensive proposition with the market cap recently above $10 billion.

Data integration specialist Informatica (NAS: INFA) advanced 10%. It's competing with big guns such as IBM, Microsoft, and Oracle -- and growing more quickly than them, too. Its profit margins have also been inching up in recent years.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Green Mountain Coffee Roasters (NAS: GMCR) has been frustrating naysayers for many years now, repeatedly surpassing expectations. It hit a bump recently, though, and is down some 12% over the past year as its patents face expiration and competitors such as Starbucks threaten.

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.

Learn about the 5 ETFs That Could Soar in 2012. And if you're looking for some great investments beyond ETFs, consider these 12 Dividend Stocks for 2012.

At the time thisarticle was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, owns shares of Starbucks and Microsoft, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Oracle, Starbucks, and Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, Informatica, Monster Beverage, Starbucks, and Green Mountain Coffee Roasters, as well as creating a bull call spread position in Microsoft, a lurking gator position in Green Mountain Coffee Roasters, and writing covered calls on Starbucks. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not 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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