Diversification is good for individual investors, but it's also a good way for an economy, or for a financial sector to hedge against systemic risks.

So if ETFs are taking over, it may be an improvement overall, but it's worth thinking through the black swans, the new low probability high impact risks that this creates.

Bloomberg has had a few comments about liquidity risks for ETFs on their site and in the Odd Lots podcast.[0] On the other hand, they've made these comments for a few years now, so maybe this is a chicken little story. Or maybe it only kicks in under certain conditions, like if we saw interest rates, demand for goods, and inflation spike, people start moving to other investments, potentially causing a sudden run on funds that are stuck holding only bonds without any real returns or way to offload them?

[0] http://www.bloomberg.com/news/articles/2014-09-23/etf-liquid...