Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some real-estate stocks to your portfolio, the Schwab U.S. REIT 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. It focuses on real estate investment trusts, or REITs, which are required to pay out most of their earnings as dividends.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Schwab ETF's expense ratio -- its annual fee -- is a very low 0.07 %. It recently yielded about 2.5%.

This ETF is too young to have a sufficient track record to assess. 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 5%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

Why real estate?
Perhaps because there's a finite amount of it, real estate tends to hold its value over time, though there can be hiccups along the way. REITs, meanwhile, offer an extra benefit, via their requirement to pay out at least 90% of their income in the form of dividends.

More than a handful of real-estate companies had strong performances over the past year. General Growth Properties , for example, yielding 2.2% recently, gained about 38% over the year. It has emerged from bankruptcy protection with restructured debt and reported funds from operations up 9% in its last quarter. It has been selling off its more poorly performing properties to strengthen its portfolio and pay down debt. Activist shareholder William Ackman had agitated for the company to be sold but has recently dropped that idea, agreeing to be a passive investor. The stock is not the bargain it used to be, though.

Health Care REIT gained 20% and recently yielded 4.8%. Management has explained in a conference call that "our business model continues to hit on all cylinders." Earlier this year, the company acquired Sunrise Senior Living , boosting its elder-care facility portfolio. Meanwhile, same-store margins and occupancy rates have been growing, and revenue has been growing at an accelerating rate. Obamacare will boost the number of people receiving medical care, which should help REITs such as this one that focus on health-care properties.

HCP , also focusing on health care, gained 18% and recently yielded 4.4%. The company has seen its revenue and earnings growth soar by more than 30% apiece over the past year. It has been investing in senior housing properties. Though some worry that health-care reforms might reduce profits from senior properties, HCP is relatively well positioned, with a significant portion of its patients paying for their own care. Its last quarter featured the company raising $1.5 billion in capital and upping its projections.

Digital Realty Trust advanced 9% over the past year, as investors excited about the growth in cloud computing grabbed shares of the company that focuses on data-center properties. It's geographically diversified, too, with properties in the U.S., Europe, and Asia. Like many REITs, it offers a tasty dividend as well -- recently yielding 4.2%. After its last quarter, management noted: "While slow economic growth in the U.S. and abroad has delayed the decision-making process of many enterprise customers ... we are very optimistic about the growth prospects and the near and long-term outlook for our business. In fact, we are on the offensive, taking advantage of our strong balance sheet and financial resources to continue to both expand our portfolio through new development leasing and to be the consolidator in the industry consistently making accretive investments of strategic data center portfolios and individual properties."

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.

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The article Make Money in Real Estate (and Dividends) the Easy Way originally appeared on Fool.com.

Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool recommends Health Care REIT,. 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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Who could blame you for being skittish about the stock market? It sank roughly 40% back in 2008, and despite its subsequent rise, it's been whipping sharply up and down over the past few months. So far this month, the Dow Jones Industrial Average (INDEX: ^DJI) shed more than 5%, falling from 11,614 to 10,992. Yikes. You may want to flee to cash until the storm passes, but that would probably be a mistake.

A recent MFS survey found that 40% of those aged 18 to 30 "will never feel comfortable investing in the stock market." Unfortunately for them, taking your ball and going home isn't the best idea.

No one knows when the market will plunge or surge. Sitting on the sidelines can keep you from enjoying considerable gains. Look at the S&P 500's returns over the following years:

Year	S&P 500 Return
1995	38%
1996	23%
1997	34%
1998	29%
1999	21%
2000	(9%)
2001	(12%)
2002	(22%)
2003	29%

Source: Standard & Poor's.

Remember that the market's long-term annual average return is roughly 9% to 10%. After a 38% gain in 1995, it would have seemed reasonable for investors to move to cash, right? A big gain in the following year would have seemed unlikely. But 1996 was another big year. And those who got out after those two huge gains lost out on three more years of outsized gains. Then, in 2003, those who were reluctant to invest in stocks after three years of major losses lost again, forfeiting a gain of 29%.

For those of us with long investing horizons, it's best to just stay put -- and to keep adding money to the market.

Missed opportunities
Following the 2008 stock market implosion, if you'd waited until you were sure it was safe, you'd have missed out on 2009's 27% gain. With individual stocks, you'd have missed out on more or less than that. For example:

Company	2008 Return	2009 Return
New York Community Bancorp (NYS: NYB)	(26%)	30%
lululemon athletica (NAS: LULU)	(83%)	280%
Altria (NYS: MO)	(30%)	39%
Cisco Systems (NAS: CSCO)	(40%)	47%

Data: Morningstar.

Back in 2009, some investors shunned big banks in favor of smaller ones. New York Community Bancorp didn't need or take any bailout money, and it kept up its dividend payments. On the retail front, lululemon athletic was posting strong revenue growth numbers despite a shaky economy.

Altria also rebounded quickly in 2009. It helps that tobacco is a defensive industry, with literally addicted customers. My colleague Morgan Housel predicted that Altria would do well at the beginning of the year, noting that its dividend yield at the time was a whopping 8.4%. Back in 2009, the company was boosting its smokeless tobacco business, having bought UST in 2008.

Cisco Systems was another company we expected to do well; it had fallen to rather undervalued levels, sported little debt and robust profitability, and was partnering with VMWare (NYS: VMW) and EMC on system servers. Since 2009, though, the company has struggled -- and it's now fallen enough to once again look like a bargain.

Hello, volatility
Volatility is nothing to be scared of. Investors can measure stocks' volatility via their "beta," which reflects how much more volatile than the overall market they are. Consider Silver Wheaton (NYS: SLW) . Its beta of 1.6 suggests that, on average, its stock is 60% more volatile than the overall market.

As long as a company is healthy and growing, that unpredictability can be just fine. Silver Wheaton tumbled a severe 62% in 2008, but came roaring back by 131% in 2009. Investors at the time found themselves more attracted to the perceived safety of precious metals such as gold and silver, which made companies such as Silver Wheaton more appealing. Its "flawless performance" didn't hurt, either; the miner posted record numbers for sales, production, earnings, and cash flow.

Shrinking dollars
Leaving your assets in cash won't simply rob you of opportunities like those above. It can also allow inflation to eat away at your assets. Inflation has averaged about 3% per year, topping the interest rates of bank accounts and CDs these days, as well as many bonds.

But despite their sluggish gains, those latter investments are the right option under certain specific circumstances. If you'll be needing some of your funds in the next few years, don't keep them in stocks. The market may tank abruptly, leaving you without enough time to wait for it to rebound. Also, if you just don't know what you're doing in stocks, or you don't understand what your various holdings do and how healthy they are, you'd do well to sell them.

For most of us, though, whether we're in promising stocks or a simple broad-market index fund or two, it's best to stay put. Just look at the occasional downturn as a great opportunity to add more shares at depressed prices.

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At the time this article was published Longtime Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of lululemon athletica, EMC, and Altria Group. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems, Lululemon, and VMware. 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.

Copyright (C) 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.