The correct answer is      (D.)  Agrochemicals

Over the past three years, the S&P has posted respectable annual returns of about +11.5%. However, the agrochemical sector has delivered sensational gains of +63.5% annually over that same span -- good enough to more than quadruple a modest $5,000 investment into nearly $22,000. Obviously, anyone who decided a few years ago to shift an extra 5% or 10% of his or her portfolio into agrochemical stocks has been well-rewarded.

There's nothing wrong with simply matching the returns posted by the overall market, but more aggressive investors in search of higher returns are fully aware that a market average like the S&P 500 is just that -- an average. Some sectors will beat the average, others will lag. Although few investors have the foresight to consistently predict the market's top-performing sectors, from time to time various sectors do appear promising. And right now, both agrochemical and healthcare stocks are firing on all cylinders.

Consider that the number of people age 65 or over is projected to explode to 973 million worldwide within the next three decades. This massive demographic shift will trigger a tidal wave in healthcare spending. Plus, healthcare spending isn't cyclical, which makes this sector a smart defensive play during times of economic uncertainty. 

The statistics are already staggering:

• Between 1994 and 2004, average domestic per-capita spending on healthcare surged +75% to reach $6,280 per person in the United States.
• As a country, we now spend more than $2 trillion on annual healthcare expenditures -- or more than $5 billion each and every day.
• Healthcare spending is climbing at triple the rate of inflation, and by some estimates is forecast to hit $4 trillion annually by 2015. That would equate to a full 20% of the nation's GDP -- up from just 6% in the early 1980s.

Profiting from the Booming Healthcare Market
Investors have plenty of options in this niche of the market. They can always buy shares of a select handful of the sector's most promising companies, but this subjects investors to quite a bit of company-specific risk: adverse FDA rulings, recalls, lawsuits, and other problems can all cripple a stock. 

This is where exchange-traded funds (ETFs) truly provide an edge -- they let investors move nimbly in and out of virtually every corner of the market with minimal cost. They also give investors a low-cost way to gain diversified exposure a large basket of stocks.

But don't assume these funds all have similar portfolio compositions. Some invest in domestic stocks; others take a global approach. Some are broad-based; others carve into a subsector with surgical precision. Some track indices, while others mirror fundamental or even quantitative benchmarks.

All of this raises the question, what's the best way to play the long-term trend in healthcare stocks? 

Nathan Slaughter, editor of StreetAuthority.com's ETF Authority newsletter, already weeded through this crowded space and uncovered six of the most profitable healthcare funds on the market. In this month's issue, Nathan provides an in-depth look at his two favorite healthcare funds. These include a fund that has outperformed 99% of its peers over the past three years, plus a "smart" index fund that backtesting shows would have delivered +17.9% annual returns over the past four years. To learn the names of these funds and to learn more about Nathan's ETF Authority newsletter, please click here.