The original exchange-traded funds, based on broad-based indexes such as the S&P 500 and the Nasdaq 100, gave investors wide exposure to a multitude of stocks. But as the market has become more crowded, investment advisory firms anxious to jump on the bandwagon have been offering narrower and narrower slices of the market. The newest to come on the scene is single-country ETFs—a bad idea, according to Gary Gordon, a certified financial planner and president of Pacific Park International. Many of these are focused on emerging-markets, perhaps the riskiest of all.
Another danger is international ETFs, many of which invest as much as 25% of their assets in a single stock. Funds guilty of this include the MSCI Mexico Index Fund and MSCI South Korea Index Fund.