The best application of a niche ETF is the one that best suits an investors needs and objectives. For some, adding niche ETFs to a portfolio can help diversify it. Better diversification may mean lower overall portfolio risk.

For others, niche ETFs are merely tactical, short-term tools to express a view on a highly –specialized segment of the market. This could mean a higher risk to an investor’s portfolio. The single most important thing to do is to some basic research to learn how the Niche ETF is constructed before deciding to invest.