Exchange traded funds (ETFs) are competing for market share with newer and more exotic offerings. Titles including dermatology and wound care, to insiders or Chile are cropping up and as the flavors become more specialized, the slice of the market gets narrower.

The Seattle Times analysis points out that the niche ETFs don’t always offer the other benefits of broader ETFs, the lower expenses, ease of trading and diversification melts away.

Experts warn that ETFs which stray from the plain vanilla types are dropping down into a  riskier area of the market. ETFs that don’t catch on may eventually liquidate which could result in unexpected capital-gains taxes for shareholders.

But these ETFs can have a place in some portfolios. Perhaps there is an area you want exposure, but the broad based ETFs just don’t give you the exposure you want. Investors have their own reasons for making the investment choices they make. And everyone’s risk tolerance is different. Just keep yours in mind when making the choice.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.