For long-term investors, the diversification and low costs that exchange-traded funds provide can make them some of the best investments in the market. However, much like stocks, the worst ETFs can also be portfolio poison.
The most important thing for investors to do is make sure they understand exactly what they are buying. Buying and selling ETFs is as straightforward as buying and selling stocks, but while they trade like stocks, they can hold a number of complicated and unique investments that can do a lot of harm to investor returns.
Many ETFs are not designed for long-term investing at all. There are a number of ETFs out there that were created with the sole intended purpose of serving as day-trading instruments. You wouldn’t use roller skates in an ice skating rink. Yet many investors will buy and hold these day-trading ETFs hoping for long-term gains.
Here are three of the worst ETFs for long-term investors.