In 2007, more than 270 new exchange traded funds (ETFs) were launched, and half of these funds are niche or "specialty" funds

Eleanore Laise for The Wall Street Journal reports that few financial experts advise long-term allocations to these funds. Despite this, specialty ETFs attracted $7.7 billion in assets last year. For the future, investors can expect some of the ETFs to become even thinner, and this makes it all the more important to research what you are investing in. Investors must also avoid performance chasing with these narrow funds.

Some of these newer ETFs are handy to investors, but many of them can come
with risk, as with any investment. Some of the narrow market segments that were
introduced include water, agribusiness, nuclear energy and luxury goods.

Investors now have more options than ever, which is never a bad thing. The advent of these narrow funds give all of them choices, which actually works in their favor.

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.