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Past performance is not a guarantee of future results.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional/financial consultant before making any investment decisions.
The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
There are risks involved with investing in ETFs, including possible loss of money. Index-based ETFs are not actively managed. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Both index-based and actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.
The Industry Classification Benchmark (ICB) is a system for assigning all public companies to appropriate subsectors of specific industries.
The S&P 500® Index is a broad-based, market-capitalization-weighted index of 500 of the largest and most widely held stocks in the United States.
The technology select sector index is a modified capitalization-weighted index representing the performance of technology companies that are components of the S&P 500 Index.
The Magnificent Seven stocks are a group of high-performing and influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.
Invesco does not offer tax advice. Investors should consult their own tax professionals for information regarding their own tax situations.
Investors should be aware of the material differences between mutual funds and ETFs. ETFs generally have lower expenses than actively managed mutual funds due to their different management styles. Most ETFs are passively managed and are structured to track an index, whereas many mutual funds are actively managed and thus have higher management fees. Unlike ETFs, actively managed mutual funds have the ability react to market changes and the potential to outperform a stated benchmark. Since ordinary brokerage commissions apply for each ETF buy and sell transaction, frequent trading activity may increase the cost of ETFs. ETFs can be traded throughout the day, whereas, mutual funds are traded only once a day. While extreme market conditions could result in illiquidity for ETFs. Typically they are still more liquid than most traditional mutual funds because they trade on exchanges. Investors should talk with their financial professional regarding their situation before investing.
This content should not be construed as an endorsem*nt for or recommendation to invest in Microsoft Corp or Apple Inc. Neither Microsoft Corp nor Apple Inc are affiliated with Invesco. Only 2 of 101 underlying Invesco QQQ ETF fund holdings are featured. Holdings are subject to change and are not buy/sell recommendations. See invesco.com/qqq for current holdings. As of 2/15/2024, Microsoft Corp and Apple Inc made up 8.85% and 8.33% respectively, of Invesco QQQ ETF.
FAQs
Five of the key ETF risks to consider include: market risk, tracking error, liquidity, sector concentration, and single-stock concentration. A little due diligence can go a long way before purchasing an ETF, so don't judge a book by its cover.
What is the risk of investing in ETFs? ›
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment.
What are the cons of ETF? ›
Disadvantages of ETFs
- Higher Management Fees. Not all ETFs are passive. ...
- Less Control Over Investment Choices. When you invest in an ETF, you're buying a basket of stocks intended to align with the fund's objectives. ...
- May Not Beat Individual Stock Returns.
For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.
What should I know about ETFs? ›
ETFs or "exchange-traded funds" are exactly as the name implies: funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.
What is the biggest risk in ETF? ›
The single biggest risk in ETFs is market risk.
Are ETF funds high risk? ›
ETFs are considered to be low-risk investments because they are low-cost and hold a basket of stocks or other securities, increasing diversification. For most individual investors, ETFs represent an ideal type of asset with which to build a diversified portfolio.
Are ETFs riskier than funds? ›
The short answer is that it depends on the specific ETF or mutual fund in question. In general, ETFs can be more risky than mutual funds because they are traded on stock exchanges.
Why am I losing money with ETFs? ›
Interest rate changes are the primary culprit when bond exchange-traded funds (ETFs) lose value. As interest rates rise, the prices of existing bonds fall, which impacts the value of the ETFs holding these assets.
Why are ETFs riskier than mutual funds? ›
While these securities track a given index, using debt without shareholder equity makes leveraged and inverse ETFs risky investments over the long term due to leveraged returns and day-to-day market volatility. Mutual funds are strictly limited regarding the amount of leverage they can use.
ETFs are a bundle of assets and securities such as different stocks and bonds. A single ETF can contain dozens or hundreds of different stocks, or bonds or almost anything else considered an investable asset. Since ETFs are more diversified, they tend to have a lower risk level than stocks.
What is a disadvantage of an ETF quizlet? ›
The disadvantage is that ETFs must be purchased from brokers for a fee. Moreover, investors may incur a bid-ask spread when purchasing an ETF.
What is the primary disadvantage of an ETF Quizlet? ›
What is the primary disadvantage of an ETF? Investors have to pay a broker commission each time they buy or sell shares. ETFs tend to have lower management fees than comparable index mutual bonds. ETFs usually have no minimum investment amount.
Are ETF good or bad investments? ›
If you're looking for an easy solution to investing, ETFs can be an excellent choice. ETFs typically offer a diversified allocation to whatever you're investing in (stocks, bonds or both). You want to beat most investors, even the pros, with little effort.
What are the 4 benefits of ETFs? ›
Positive aspects of ETFs
The 4 most prominent advantages are trading flexibility, portfolio diversification and risk management, lower costs versus like mutual funds, and potential tax benefits.
How much of your money should be in ETFs? ›
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
Are ETFs safe in a crash? ›
Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification. ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.
Is an ETF safer than a stock? ›
Advantages of investing in ETFs
A well-diversified ETF such as one based on the S&P 500 can beat most investors over time, making it easy for regular investors to do well in the market. ETFs tend to be less volatile than individual stocks, meaning your investment won't swing in value as much.
What happens to my ETF if Vanguard fails? ›
Vanguard is paid by the funds to provide administration and other services. If Vanguard ever did go bankrupt, the funds would not be affected and would simply hire another firm to provide these services.
