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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
Key takeaways. ETFs have some structural advantages relative to mutual funds but it's important to remember that ETFs have risks like all investments. Five of the key ETF risks to consider include: market risk, tracking error, liquidity, sector concentration, and single-stock concentration.
What are the risks of ETF currency? ›
In general, much like other ETFs, when you sell an ETF, if the foreign currency has appreciated against the dollar, you will earn a profit. On the other hand, if the ETF's currency or underlying index has gone down relative to the dollar, you'll end up with a loss.
What are the pros and cons of ETFs? ›
In addition, ETFs tend to have much lower expense ratios compared to actively managed funds, can be more tax-efficient, and offer the option to immediately reinvest dividends. Still, unique risks can arise from holding ETFs as well as tax considerations, depending on the type of ETF.
What is a potential drawback of investing in an ETF? ›
To sum up, ETFs offer a wide range of benefits, such as diversification, low cost, and flexibility for investors of all levels. However, like any investment, they have potential drawbacks, such as market volatility and management fees.
What happens if ETF collapses? ›
Because the ETF is a separate legal entity from the issuer that manages it, the ETF will control all the assets in its portfolio up until the date set for its liquidation, at which point the manager will sell the assets and distribute the proceeds to investors.
Is investing in ETF good or bad? ›
ETFs offer benefits like cost-saving, easy trading, and diversification. However, it is important to consider the downsides, such as less variety and possibly higher trade costs.
Why are ETFs more risky than mutual funds? ›
In general, ETFs can be more risky than mutual funds because they are traded on stock exchanges. Their value can fluctuate throughout the day in response to market conditions.
Are ETFs safer than stocks? ›
Though ETFs can lose money, they are still considered less risky than stocks. That's because instead of holding a few individual stocks, an ETF can hold hundreds or even thousands.
Should a beginner invest in ETFs? ›
ETFs for beginners
One way for beginner investors to get started is to buy ETFs that track broad market indexes, such as the S&P 500. In doing so, you're investing in some of the largest companies in the country, with the goal of long-term returns.
Why is ETF low risk? ›
ETFs are designed with built-in diversification. After all, anytime you can include hundreds or thousands of assets in a single instrument, it is likely to be highly diversified. This means that a large ETF automatically has more diversification and lower risk than a single stock.
Yes, an inverse ETF can reach zero, particularly over long periods. Market volatility, compounding effects, and fund management concerns can exacerbate losses. To successfully manage possible risks, investors should be aware of the short-term nature of these securities and carefully monitor their holdings.
Can an ETF ever go negative? ›
But can a leveraged ETF go negative? No. If you own a leveraged ETF you can't lose more than your initial investment amount. You would never be liable for more than you invested; in a sense, the amount you could lose is capped.
Can ETFs go to zero? ›
Yes, an inverse ETF can reach zero, particularly over long periods. Market volatility, compounding effects, and fund management concerns can exacerbate losses. To successfully manage possible risks, investors should be aware of the short-term nature of these securities and carefully monitor their holdings.
Is an ETF safer than a stock? ›
Because of their wide array of holdings, ETFs provide the benefits of diversification, including lower risk and less volatility, which often makes a fund safer to own than an individual stock. An ETF's return depends on what it's invested in. An ETF's return is the weighted average of all its holdings.
Are ETFs good for beginners? ›
Exchange-traded funds (ETFs) are ideal for beginning investors due to their many benefits, which include low expense ratios, instant diversification, and a multitude of investment choices. Unlike some mutual funds, they also tend to have low investing thresholds, so you don't have to be ultra-rich to get started.
