This article throws light on an issue regarding Exchange Traded Funds…and that is, some ETF’s are not as well diversified as many investors think.

Among the examples given are Pharmaceutical Holdrs (AMEX: PPH) which has 22 percent of its holdings in Johnson and Johnson and 21 percent in Pfizer. Also, Telecom Holdrs (AMEX: TTH) has 30 percent of its holdings in AT&T.

It is best when deciding which Exchange Traded Fund (ETF) to invest in, to do some research and actually find out how diversified they are and which stocks they contain. When Exchange Traded Funds were first introduced, their main purpose was to provide an investment vehicle for diversification. So, if ETF’s are concentrated on just a few stocks, this defeats their purpose.

Some Money Managers such as JK Financial and XTF Advisors tend to dissuade their clients from investing in such funds.

Source: Yahoo News