By Scott Ronalds

iShares fixed income turns 50. The global leader in exchange traded funds (ETFs) recently launched their 50th U.S.-based fixed income ETF (iShares offers 22 fixed income ETFs in Canada). Investors can access a wide array of products, including 8 different U.S. government bond funds, 10 municipal funds and 12 credit-based (corporate) funds. Indeed, iShares offers investors more tools than ever to customize their portfolios, as highlighted in a brochure celebrating the milestone.

Is this a good thing? Do investors need access to a 3-7 Year Treasury ETF, a Baa-Ba Rated Corporate ETF, or a Ginnie Mae bond-focused ETF? Professional money managers, perhaps. Average investors, no. Yet, the products are being marketed to average investors. The fixed income world is complicated. Investors need a firm understanding of the yield curve, duration, credit risk, and inflation in order to use these ETFs properly. Otherwise, they’re just different shades of gray.

Broad-based funds such as the iShares Barclays Aggregate Bond ETF can be useful tools to gain diversified exposure to an asset class, but the more slicing and dicing non-sophisticated investors do through the use of specialized products, the greater the risk of cutting themselves.

The once-simple ETF product shelf is quickly turning into a messy closet, not unlike the mutual fund space. Likewise, the graveyard continues to grow. Last week, for example, Horizons announced that it will be terminating five ETFs including the Horizons BetaPro COMEX Long Gold/Short Silver Spread ETF (try saying that five times in a row).

Our advice is to keep it simple. If your portfolio is swelling with products you don’t understand, pluck the gray.