Exotic ETFs Can Be Useful

It seems a new ETF launches almost every time you turn around. As more products hit the market, the products keep changing to expose narrower-and weirder- market niches. Marc Hogan of Business Week warns that investors shouldn't assume something is a smart investment simply because it's an ETF.

"Five For The Money" looks into five of ETF providers most unusual offerings, one of which is iShares MSCI Belgium Index (EWK). Shareholders of EWK are investing in a slim segment of the world market while the fund's top five holdings make up 60% of the portfolio. Despite this potential for volatility, EWK has posted total 5-year annualized market returns of 24%, beating the MSCI EAFE index by 6%.

Other ETFs mentioned include:

• PowerShares Lux Nanotechnology (PXN)
• HealthShares Enabling Technology (HHV)
• Claymore Macroshares Oil Down (DCR)
• Internet HOLDRs (HHH)

These ETFs may be out of the ordinary, but there are still uses for exotic ETFs. Individual investors and advisors are utilizing ETFs more for specific asset allocation and identifying changing trends in the marketplace. The only concern is when individual investors get too enthusiastic about a sector or global region after the lion's share of its upside performance is behind.