{"id":4663,"date":"2022-12-09T23:56:00","date_gmt":"2022-12-09T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=4663"},"modified":"2026-05-15T12:56:06","modified_gmt":"2026-05-15T04:56:06","slug":"non-broad-market-etfs","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/","title":{"rendered":"Strong reasons not to invest in non-broad market ETFs"},"content":{"rendered":"\n<p>Earlier in my ETF-related article, I asuggested that investors should only choose ETFs that track the broader stock market; do not invest in non-broad market ETF. This article wants to explain my thoughts clearly.<\/p>\n\n\n\n<p>I suggest you see the most important article about ETFs in my blog &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/5688\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why most investors should invest ETFs tracking broad market?<\/a>&#8220;.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_83 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#ETF_is_too_popular\" >ETF is too popular<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#Loss_of_benefits_and_advantages_of_ETFs\" >Loss of benefits and advantages of ETFs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#Scrape_the_barrel\" >Scrape the barrel<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#Non-broad_market_ETF_turn_into_hype\" >Non-broad market ETF turn into hype<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#It_makes_things_complicate\" >It makes things complicate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broad-market-etfs\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"ETF_is_too_popular\"><\/span><strong>ETF is too popular<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The main reasons for the design of ETFs are to allow investors who are unable to actively select stocks to find investment performanceon on par with market performance and reduce investment risks (that is, the severe stock price volatility of individual stocks). However, because the global ETF issuance is becoming more and more popular with investors, issuers have all spared no effort to design ETFs with all kinds of constituent stocks to attract investors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Loss_of_benefits_and_advantages_of_ETFs\"><\/span><strong>Loss of benefits and advantages of ETFs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is not recommended to invest in ETFs in any specific field, industry, or geographic area. The main reason I hold is very simple; investing in non-tracking broad market ETFs will lose the benefits and advantages of investing in ETFs. This approach is actually the same as investing in individual stocks. It will also cause investors to go back to the original point and turn the headache of &#8220;selecting stocks&#8221; into &#8220;selecting ETFs.&#8221; This caused the problems that ETFs were designed to solve in the first place, but they were not resolved in the end.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Scrape_the_barrel\"><\/span><strong>Scrape the barrel<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In addition, the constituent stocks of non-broad market ETF are uneven, and it is very common to scrape the barrel. You must be forced to buy some poor constituent stocks that wealth management companies forcibly add to the constituent stocks for various reasons (saying it will scare you). But investors have no choice and are forced to buy constituent stocks they don&#8217;t like. In the world of investment, any forced buying is the beginning of failure, and it must end badly.<\/p>\n\n\n\n<p>A few days ago, I pointed out one of the most popular electric vehicle ETFs, it has 20 constituent stocks. There was even Sinosteel in it. I asked the issuer why? The answer they gave me was &#8220;because an electric vehicle is a car, the car needs steel.&#8221; It is also unreasonable for me to ask that the component stocks do not have Texas Instruments (ticker: TXN). People in the automotive industry know that Texas Instruments is a major supplier of automotive chips, but I  have not received any reply. Please see the post &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/11\/22\/texas-instruments-bio\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Texas Instruments make money? Amazing long term capital reward and company net profit margin!<\/a>&#8220;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Non-broad_market_ETF_turn_into_hype\"><\/span>Non-broad market ETF t<strong>urn into hype<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Today, the whole world is crazy for metaverse and electric vehicles, and there are countless issuers on the market launching related ETFs to catch up on the trend and win the favor of investors. When the trend recedes, soon or later, from couple of quarters to 2 to 3 years; <a href=\"https:\/\/finance.yahoo.com\/news\/10-best-metaverse-etfs-buy-131603514.html\" target=\"_blank\" rel=\"noreferrer noopener\">this kind of ETF<\/a> launched with the trend will definitely be abandoned by the masses, and the market value will shrink significantly. It is definitely the investors\u2019 pockets that are hurt. There are too many examples in history to prove it, so I won\u2019t give examples one by one here.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"It_makes_things_complicate\"><\/span>It makes things c<strong>omplicate<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In short, non-broad market ETF complicates simple issues. Anything or something in the world, the more complex, the greater the chance of error. On the road to investment, this principle holds true.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The investment guru John Bogle who founded the world&#8217;s first ETF. John Bogle suggested that everyone invest in ETFs with the widest coverage, and not chase ETFs with any concept, because when a concept becomes popular, it is often when the price is on the high side, and investors are right in the middle of an ambush. In short, investors should never think that they are smarter than others.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"231\" height=\"110\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2022\/12\/ETF-Freepik-1600x1200-1.jpg\" alt=\"non-broad market ETF\" class=\"wp-image-16442\"\/><figcaption class=\"wp-element-caption\">credit: Freepik<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/11\/14\/power-of-index-etf\/\">The power of index ETFs underestimated<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2026\/05\/14\/top-10-industry-etfs\/\">Vanguard&#8217;s Top 10 Industry ETFs and their Returns<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/07\/10\/etf-regulations\/\">Consequences of Index Fund and ETF Regulations and Restrictions<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/04\/u-should-invest-etfs\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why most investors should invest ETFs tracking broad market?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/05\/29\/turn-to-passive-investment\/\">Investors turn to passive investment funds ETF and abandoning active investment funds<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/\" target=\"_blank\" rel=\"noreferrer noopener\">Market index and the market index ETF is not identical<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/25\/stock-worth-holding-forever\/\" target=\"_blank\" rel=\"noreferrer noopener\">S&amp;P 500 index, the only stock worth holding forever<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/02\/08\/etfs-tracking-us-market\/\" target=\"_blank\" rel=\"noreferrer noopener\">US issued ETFs tracking US market is your best bet<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/13\/top-10-etfs\/\" target=\"_blank\" rel=\"noreferrer noopener\">Top 10 ETFs and important major US stock market index<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/26\/disadvantages-of-etf\/\" target=\"_blank\" rel=\"noreferrer noopener\">Disadvantages of ETF investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/01\/06\/any-reason-to-buy-mutual-fund\/\" target=\"_blank\" rel=\"noreferrer noopener\">Any strong reason to buy mutual fund?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/09\/non-broader-market-etfs\/\">Strong reasons not to invest in non-broad market ETFs<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/11\/22\/texas-instruments-bio\/\" target=\"_blank\" rel=\"noreferrer noopener\">How does Texas Instruments make money? Amazing long term capital reward and company net profit margin!<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Invest in non-broad market ETF is actually the same as investing in individual stocks, go back to the original point and turn the headache of &#8220;selecting stocks&#8221; into &#8220;selecting ETFs.&#8221;<\/p>\n","protected":false},"author":1,"featured_media":16442,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45,129,564],"tags":[38],"class_list":["post-4663","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-etf","category-ev","category-metaverse","tag-txn"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/4663","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=4663"}],"version-history":[{"count":45,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/4663\/revisions"}],"predecessor-version":[{"id":42212,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/4663\/revisions\/42212"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/16442"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=4663"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=4663"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=4663"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}