Here's a Basket of Potentially Explosive Growth

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some biotech stocks to your portfolio, the Market Vectors Biotech ETF 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.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Market Vectors ETF's expense ratio -- its annual fee -- is a low 0.35%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF doesn't have a long enough track record to assess, but it did handily trounce the world market over the past 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.

Why biotech?
The biotechnology arena is a very promising one for investors because of our planet's growing and aging population, which will require more medical care over time. It's not without risks, though, as many new treatments are costly to develop and don't always clear FDA hurdles.

More than a handful of biotechnology companies had strong performances over the past year. Pharmacyclics , for instance, has nearly quadrupled in value over the past year. The company has a very promising cancer-fighting drug, ibrutinib, and other possibilities in its pipeline. It has been issuing more shares and diluting the value of existing shares, but it also has a lot of potential, if tests turn out well.

ARIAD Pharmaceuticals , up 31%, received FDA approval for its leukemia drug ponatinib. Its bone-tumor drug ridaforolimus was rejected in Europe, though, but it might still prove effective against other cancers. The company's recent quarterly results were mixed, with cash burn a concern as losses increase -- thus, it's looking to raise more funds. The company has been spending heavily on research and development, and it needs some more success from its pipeline.

Other companies didn't do as well last year but could see their fortunes change in the coming years. Dendreon , for example, is down 57%. The maker of expensive prostate-cancer drug Provenge has lost a lot of money and has been burning through a lot of cash, but some now see it as attractively priced and think it might get acquired in the near future. Its sales do seem to be picking up, and upcoming trial results will make the company's future clearer.

Exelixis , down 8%, recently received FDA approval for its thyroid cancer drug, cabozantinib -- which may also get approved to treat prostate cancer. In fact, Exelixis is looking at treating as many as nine different cancers with the drug.

The big picture
Demand for biotechnology isn't going away 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.

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The article Here's a Basket of Potentially Explosive Growth originally appeared on Fool.com.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool recommends Exelixis and owns shares of Dendreon and Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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