Niche ETFs are a part of the concept of thematic ETFs. While they are similar in many ways to thematic ETFs, niched ETFs also have significant differences. A niche ETF generally targets a narrower focus than a broad-based sector or general theme-based ETF.

How to Determine if a Niche ETF is a Good Fit for Your Portfolio. Many investors have found that it can be difficult to evaluate niche ETFs based on performance returns alone.

Beyond exposure to the general theme, each niche ETF offers access to many targeted levels of market exposure. This includes capitalization ranges, the type of asset, industries, sectors and geographic locations.

The dramatic growth of Niche ETFs has emerged due in large part to the market’s response to investor demand. The sheer number of niche products continues to expand as investors become more aware of them and learn how to use them to their best advantage in seeking to develop an optimal investment portfolio.