DEFINITION of 'Steel Industry ETF'
A sector exchange-traded fund that invests only in companies that manufacture and market steel. The steel industry is very cyclical, as demand surges during economic boom times and plunges during recessions; this makes steel stocks and steel ETFs inherently volatile as well. With demand for steel surging in emerging economies such as India and China, a steel ETF can be viewed as a suitable way for investors to gain exposure to such markets.
BREAKING DOWN 'Steel Industry ETF'
A steel ETF is a good example of an ETF that targets a very specific market niche. There are only a few steel ETFs that trade on North American exchanges. Apart from U.S. steel companies, these ETFs also hold stocks of international steel producers.
By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order