The potential risk and pit fall associated with ETF/10% beneficiary to Tron Fan club

Good day fellow members of this wonderful community, hope we are all doing well and coping with the economy.today I will deliberate on ETFs,I will be highlighting on the potential risk and pit fall associated with ETFs,the aim of this post is to give us an upper hand hand in terms of inventing in the crypto market.befor properly dialoguing on the risk and pitfall,I will like to discuss terms associated with ETFs;

What are ETFs

Exchange traded funds (ETF)this are funds that trade on exchange, generally tracking an index.an ETF is a type of investment fund which is also an exchange traded product ,in the sense that it trade on stock exchange.

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Risks associated with ETFs

Market risk
This is one of the major risk in ETF and it is also the
the biggest risk because ETF are subject to market fluctuations That is to mean if the underlying asset
In the ETF experiences decline in value,in the same way the ETF value will decrease.

Liquidity risk
Before highlighting let's understand the term liquidity
Liquidity this refers to how quickly and easily a financial asset or security can be can be converted into cash without losing significant value.In terms of liquidity ETF,some ETF have a low trading volume which can make it difficult to buy and sale price at desired price especially during volatile condition.

ETF trading risk
Unlike other mutual funds,one can't but buy an ETF with a zero transaction cost.like other stock exchange traded funds have a spread which can vary from a penny to a dollar.spread can also in effect vary as well, which is being small one day and big in the next . what's worth is that an ETF liquidity can be superficial.trading cost can quickly eat into your returns ,this is why it is always advised to understand the liquidity of the ETF before you buy.
Tax efficiency risk
An ETF may distribute capital gains to shareholders, which may result in tax implications for investors, this occurs especially if they hold the ETF in a taxable account.

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Pitfalls associated ETF
When we talk about pitfalls we are just simply referring to the hidden or unsuspected danger associated with exchange traded funds.

Brokage commission
One of the notable short comings of exchange traded funds is that a commission is required anytime you but and sell your share .in you intend to hold your investment in long time this is of no consequence to you but those who are buying in small quantity,this commission can come to be a real effect and a course to worry .

Lack of liquidity

Liquidity simply refers to how easily or how quickly an investor can buy or sell a security in a secondary market. for example,if an ETF trades at low volume or at high volatility, an investor may have a hard time selling it. An Investments are typically considered illiquid when there’s a large spread between the bid price and the ask price.

Tracking errors
Exchange traded funds may not be able to perfectly track their benchmark due to certain factors such as fees, trading cos and market value.Persistance tracking error can result to underperformance when compared to the index.

Operating expenses

Even though most exchange traded funds are passively managed, fund managers still tend to incur expenses as part of normal business operations.and this costs are reflected in the fund’s expense ratio, this measures the percentage of an individual’s investment that will be paid to the fund each year.

                 ***Conclusion***

The purpose of this article is not to discourage but to help you be able to determine the risks and pitfalls associated with ETFs (exchange traded funds)in other to have an upper hand in the ETF market.
Thanks for considering my article