MYTH-28. EXCHANGE-TRADED FUNDS ARE NOT RISKY




·         This is not entirely true.

·         ETFs do carry risks, and these are on a par with the risks inherent in its underlying index/ commodity.

·         Suppose you invest in gold ETFs that tracks the price of physical gold on a particular market.

·         Now, if the price of gold falls by 5% over, say six months, the value of your investments in that gold ETF will also fall by that amount.

·         So in ETFs, the risks are equal to the market risks of underlying instruments, and are, therefore, not totally risk free.