What are the implications for investors? “Investors should research and fully understand not only the ETF they’re considering for investment, but also the underlying index that the product is tracking,” says Kevin Mahn, portfolio manager of SmartGrowth Funds. [Solar ETFs: Is Now the Time?]
“If an ETF holds only one or two questionable positions… [and]that exposure is one-tenth of 1%… it probably doesn’t make sense to divest for that reason, unless it causes a serious doubt of judgment or investment practices of the entire management firm,” says Gay, CEO of First Affirmative Financial Network. [Knowing the Holdings of Your ETFs.]
Porter says, “If it’s no longer aligned with your values, especially because you sometimes pay more for a socially responsible investment, and if you aren’t getting great returns, as some SRI ETFs have underperformed the S&P 500, then walk away.” [Having a Strategy.]
For more stories on ETFs, visit our ETF 101 category.
Sumin Kim contributed to this article.