Investment companies are throwing a barrage of exchange-traded fund products on the U.S. market, taking what were originally index products based on fairly broad sections of the stock market and slicing them into smaller pieces.

At the end of 2005 there were 201 ETFs with $296 billion in assets, representing a 31 percent increase in assets for the year, according to the Investment Company Institute, a trade group for the U.S. fund industry. By the end of July, the number of ETFs rose to 268 and assets were $337 billion.

Trading in 10 PowerShares FTSE RAFI fundamental indexes started on the Nasdaq on Wednesday. Nine of the ETFs track industry sectors such as consumer goods and one is based on an index of small and mid-cap stocks.

All use what PowerShares Capital Management President and Chief Executive Bruce Bond calls a "fundamentally weighted approach" to indexing, unlike more traditional indexes. A company's weighting in the index depends on sales, cash flow, book value and the dividend if they have one, Bond said.

On Thursday, Claymore Securities Inc. is launching five ETFs on the Amex. One is the Claymore/Sabrient Insider ETF, which Claymore says selects stocks based on public reports of insider buying. The ETF also buys stocks which have received upgrades from Wall Street analysts.

Unlike the more familiar open-end mutual funds, which generally are priced once a day at the end or the day, ETFs trade continuously on exchanges.

The first U.S. ETF was the S&P 500 SPDR , which debuted on the American Stock Exchange in 1993. More recently, other exchanges have been getting into the act as the popularity of ETFs has grown.

The Nasdaq stock market now lists 18 ETFs and the New York Stock Exchange listed 37 ETFs via initial public offerings so far this year.

"They are better tax vehicles than mutual funds," said William Breen, manager of the Symphony Wealth Management Ovation Fund , which was started to invest in ETFs.

An investor who buys an open-end mutual fund late in the year may be buying into some built-in capital gains that will be taxable. With the ETF, there is no capital gains tax until it is sold, assuming it is sold at a profit.

Although Breen, an emeritus professor of finance at the Kellogg Graduate School of Management at Northwestern University, is clearly a proponent of ETFs, he nevertheless raises some cautionary notes about the proliferation of product.

He notes that some of the ETFs use indexes that were invented just for the ETF and thus have no history. Others, which rebalance periodically such as the end of each quarter, require a bit of effort for an investor to stay on top of what exactly the ETF owns, Breen said.

He also notes that there are a few with a heavy concentration in one or a few stocks.

"The ETF world has been primarily focused on splitting up the universe into ever smaller pieces," said David Cohen, managing director at Claymore. He said the five new Claymore products offer five distinct strategies for investors.

Another of the five, the Claymore/BNY BRIC ETF, is billed as the first U.S. ETF to focus on the economies of Brazil, Russia, India and China.

Although the majority of ETFs are based on stock indexes, there are also ETFs for fixed income and for commodities.

Claymore Securities is a private firm based in Lisle, Illinois. PowerShares became part of Anglo-U.S. fund firm Amvescap through a merger that was completed on Monday.