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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
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 is the downside to an ETF? ›
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.
How do I know if my ETF is safe? ›
ETFs can be safe investments if used correctly, offering diversification and flexibility. Indexed ETFs, tracking specific indexes like the S&P 500, are generally safe and tend to gain value over time. Leveraged ETFs can be used to amplify returns, but they can be riskier due to increased volatility.
What is market risk in ETF? ›
Market risk belongs as well to the group of ETF risks and it refers to the risk of the general price movements in a market, such as a stock market. All stocks, bonds or ETFs are influenced by the general market movements – if the whole market goes down, or up, your investment may react as well.
What is the biggest risk in ETF? ›
The single biggest risk in ETFs is market risk.
Are ETFs considered 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.
Can an ETF go to zero? ›
For most standard, unleveraged ETFs that track an index, the maximum you can theoretically lose is the amount you invested, driving your investment value to zero. However, it's rare for broad-market ETFs to go to zero unless the entire market or sector it tracks collapses entirely.
Are ETFs riskier than funds? ›
In terms of safety, neither the mutual fund nor the ETF is safer than the other due to its structure. Safety is determined by what the fund itself owns. Stocks are usually riskier than bonds, and corporate bonds come with somewhat more risk than U.S. government bonds.
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.
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.
Passive, or index, ETFs generally track and aim to outperform a benchmark index. They provide access to many companies or investments in one trade, whereas individual stocks provide exposure to a single firm. As such, ETFs remove single-stock risk, or the risk inherent in being exposed to just one company.
Is Investing in ETF good or bad? ›
Advantages of investing in ETFs
ETFs tend to be less volatile than individual stocks, meaning your investment won't swing in value as much. The best ETFs have low expense ratios, the fund's cost as a percentage of your investment. The best may charge only a few dollars annually for every $10,000 invested.
What are the 4 market risks? ›
Market risk is the risk of loss due to the factors that affect an entire market or asset class. Four primary sources of risk affect the overall market. These include interest rate risk, equity price risk, foreign exchange risk, and commodity risk.
How do you evaluate risk of an ETF? ›
The two ways to see how closely an ETF matches the index performance are 'tracking error' and 'tracking difference'. Tracking difference addresses how closely the ETF tracks the index returns, while tracking error reflects how consistent over time the tracking quality is.
How do you measure risk of an ETF? ›
The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance. Alpha measures the difference between a fund's actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure indicates the fund has performed better than its beta would predict.
Is investing in ETF good or bad? ›
Advantages of investing in ETFs
ETFs tend to be less volatile than individual stocks, meaning your investment won't swing in value as much. The best ETFs have low expense ratios, the fund's cost as a percentage of your investment. The best may charge only a few dollars annually for every $10,000 invested.
