It is therefore important for every investor to understand the disadvantages of ETFs and the disadvantages of ETFs. But of course, no investment is perfect, and ETFs also have their downsides, ranging from low dividends to high bid-ask spreads. Identifying the pros and cons of ETFs can help investors identify the risks and opportunities and decide whether these securities make sense for their portfolios. Most ETFs don’t rebalance their portfolios.
Remember that an ETF is usually programmed to track an index. In an index, the winners make up a larger percentage of an index as the price rises. At the same time, some stocks fall in price and become a smaller percentage of an index. If you own the index or ETF that tracks the index, you may own more expensive, overpriced stocks and less cheap undervalued stocks or value stocks.
