The Disadvantages of EFT's

While ETFs have many advantages, they may not always be the best fit for your investment portfolio. Before you make any ETF trade, first consider these disadvantages to make sure they are the best fit for your portfolio. – About.com

Because a ETF is traded like a stock, it means that there are the same fees as stocks so this can cut down on the profit.

One point that has been made is that the international markets can be tricky to invest with when it comes to ETF’s they require a close eye.

EFT’s are also bought in large quantities so the costs can be greater, most EFT’s are not traded as frequently as stocks and this can be related to a regional because they represent several investments and this can result in inactivity.

Because EFT’s are a fairly new region of trade it is not for new investors and may take some digging to understand. Also that it because you are buying in bulk some of your investments could be quite large. Some have raised allegations’ that the difference in the EFT and the actual price of what they represent can be different so it is hard to pinpoint where the actual prices lay.

One disadvantage of EFT’s is that you must pay a fee to buy and sell them, this is probably the single biggest downfall, you must regain your fees in profit and then some to come out ahead, again this is why most buyers are looking for large processes not in small amounts here and there because you will have to really pick the profitable ones can get just plain lucky to stay ahead if you are buying in small random amounts.

The ability to trade these EFT’s in and out during the day can lead to a “fire sell” where investors try to trade when they are low and sell when high but hot spots tend to be used up and then sold for a loss.