Investors should also consider the opportunity cost or choosing one ETF investment over another. Different ETFs, even those with very similar sounding names or objectives, take different approaches to market exposure, which can lead to a substantial impact on returns over time.
No two ETFs are created equal
Two ETFs that look similar may have varying levels of individual security or broader sector level exposures.
Additionally, different styles or themes may also exhibit varying levels of performance during market cycles as some may have a more defensive market positioning or tilt toward growth and momentum to, which also expose investors to different risks.
When developing an international investment portfolio, investors should also be aware of their country-risk exposures so that they are not too heavily tilted toward riskier market economies unless they are comfortable with the level of risk.
Basically, when it comes down to investing in ETFs, investors should always look under the hood of what they are buying.
For more information on ETFs, visit our ETF 101 category.