ETFs and Risk

All investments, including exchange-traded funds (ETFs) , involve significant risk. Before buying ETFs, consult an investment advisor to construct a well-balanced, diversified portfolio matched to your personal goals and risk profile.

Since ETFs are index-based, they tend to reflect the risk of the underlying index or basket of securities they track. The broader-based the index, the less volatile the ETF is likely to be (and vice-versa).

Recently, numerous specialized ETFs have come on the market which target narrow sectors and/or involve the use of leverage and proprietary index methodologies. These ETFs have drawn criticism from proponents of traditional broad-based index funds, who warn that they're extremely risky and unsuitable for most investors.