Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some cutting-edge nanotechnology stocks to your portfolio, the PowerShares Lux Nanotech (NYSEARCA:PXN) 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. This nanotechnnology ETF’s expense ratio — its annual fee — is an exception, at 1.11%. The fund is very 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.
It pays a 1.55% dividend yield, too, partly because among its many small holdings are some big, dividend-paying blue chips, such as Intel Corporation (NASDAQ:INTC) and International Business Machines Corp. (NYSE:IBM).
This ETF has performed … well, rather dismally, significantly lagging 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.
There can be big profits to be had if you invest in explosive new technologies when they’re still young. But it can be risky, too, as it can take quite a while for it to be clear which companies will win out over their rivals. Thus, this ETF’s poor performance so far. Still, if you are interested in nanotechnology, investing via an ETF like this can keep you from putting too many eggs in just one or two baskets that don’t become long-term winners. It’s also quite reasonable to take a wait-and-see approach with nanotechnology.
Some nanotechnology-related companies had strong performances over the past year (in part because many are involved in activities other than nanotechnology, as well). Building materials company Headwaters Inc (NYSE:HW) surged some 257%, with its HTI division holding patents on a broad range of nanotechnology-based catalysts and catalytic processes. In the company’s recent first quarter , operating income surged 37%, and revenue rose 9%. Headwaters bought assets of Kleer Lumber, and is expecting a boost from the recovering housing market.
Semiconductor equipment company Veeco Instruments Inc. (NASDAQ:VECO) gained 31%, though it may not profit as much from its LED business as expected, as organic LED technology grows more popular. Still, LED lighting is expected to grow by 32% by 2020. Canada’s University of Waterloo recently bought Veeco equipment for its new nano lab.