The Mistakes I Keep Seeing ETF Investors Make With “Set It and Forget It” Funds

For as much good as the ETF industry has done in offering hundreds of ultra-cheap investment products targeting almost every market, sector, and theme, they’re not perfect. We often hear the phrase “set it and forget it” when it comes to investing. I’ve used it several times myself. While that theory works at a high level, it overlooks some of the problems that can still emerge from it.

If you follow a few important portfolio construction principles and revisit the composition of it periodically, you’re setting yourself up for long-term success. But ignore these hazards, and your portfolio could begin turning into something you don’t want.

Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »

Image source: Getty Images.

Tech ETFs, including the Invesco QQQ ETF (NASDAQ: QQQ), have been elite performers over the past decade. But the big rally from the “Magnificent Seven” stocks has turned the fund into a highly concentrated, top-heavy portfolio that now carries extra risk.

The Magnificent Seven stocks plus Broadcom currently account for 44% of the index. As we saw from 2023-2025, investors didn’t mind much because this group was carrying the market higher. But as of March 30, Apple, Microsoft, Nvidia, Meta Platforms, Alphabet, Amazon, and Tesla were all trading at least 13% below their all-time highs. Suddenly, they were becoming a drag on the index.

Whenever a fund is heavily dependent on just a few stocks (or a portfolio is dependent on just a few stocks or funds), there’s an increased risk of lower lows. More true diversification might be the better choice.

This is the classic misjudgment that more funds equal more diversification. It can if you’re combining ETFs that target completely different market segments. But if you’re just buying the funds with the best returns over the past year, for example, there’s probably a lot of overlap.

Consider someone who owns the Vanguard S&P 500 ETF (NYSEMKT: VOO), the Vanguard Total Stock Market ETF (NYSEMKT: VTI) and QQQ. Here’s how that combination can go wrong.

  • VOO and VTI have 87% overlap. VTI owns the S&P 500 plus about 3,000 other smaller company stocks in minimal allocations. Performance will be very similar over time.

  • VOO and QQQ have a lot of the same top 10 holdings, including all of the big tech/consumer stocks already mentioned. The S&P 500 has them in smaller weights, but the high-tech exposure is still there.

Source link

Visited 1 times, 1 visit(s) today

Related Article

Adecoagro Sets 2026 Dividend Plan As Cash Returns Face Key Tradeoffs

Get insights on thousands of stocks from the global community of over 7 million individual investors at Simply Wall St. Adecoagro (NYSE:AGRO) has approved a new cash dividend distribution to shareholders. The dividend will be paid in two installments scheduled for May and November 2026. The decision reflects a planned return of capital to investors

Amkor (AMKR) Reports Earnings Tomorrow: What To Expect

Semiconductor packaging and testing company Amkor Technology (NASDAQ:AMKR) will be announcing earnings results this Monday after market hours. Here’s what to look for. Amkor beat analysts’ revenue expectations last quarter, reporting revenues of $1.89 billion, up 15.9% year on year. It was an exceptional quarter for the company, with a beat of analysts’ EPS estimates

Stock Market Outlook: 4 Signs AI Trade Could Soar 30% in Dot-Com-Style Rally

The stock market looks like it’s headed for a 1999 moment, BCA Research says. Loading audio narration… The investment research firm said it sees the potential for an AI-fueled “melt-up” in the stock market— a sharp rally in stocks that other forecasters have predicted could be followed by a brutal meltdown. BCA said that’s because

2 ETFs to Buy With $100 and Hold Forever

The stock market has already taken investors for a ride in 2026. After a relatively calm first two months of the year, the S&P 500 fell 9% only to turn around and bounce 12% higher off the lows. The uncertain direction of the Iran war, inflation, and economic growth has most people focused on what

This Ultimate AI Stock Has Gained 26% This Year and Still Isn’t Done

Nvidia (NVDA +4.30%) became the world’s most valuable company because it is a critical part of the AI build-out. Companies need Nvidia chips for computational power, but it turns out Nvidia needs another company to manufacture its chips. Taiwan Semiconductor Manufacturing Co. (TSM +5.08%) creates the chips that Nvidia designs. It’s not just Nvidia, either.

Software’s comeback bid is fading as chip stocks smash records: Chart of the Day

Software had a chance to take the baton — but chips grabbed it back. The iShares Expanded Tech-Software Sector ETF (IGV) is no longer breaking down. After sliding over 5% on Thursday — its worst day since the April 4 post-”Liberation Day” sell-off — it fought back to finish slightly positive on the week. Software

3 Market Trends That Could Shape the Rest of 2026

The past few years have featured pretty much just one dominant market theme: artificial intelligence (AI). Stock market winners, economic growth figures, and earnings expectations were all built around the AI development story. 2026 looks a little different. The AI narrative is still hanging around, but it’s more in the background now. The Iran war,

Why Beyond Meat Stock Surged This Week

Beyond Meat (BYND 8.07%) stock closed out this week’s trading with a gain of 6.1%. At one point across the stretch, the company’s share price had been up 25.6% from where it stood at the end of the previous week’s market close. Beyond Meat’s valuation moved higher in conjunction with bullish momentum for the broader

1 Small‑Cap Sports‑Data Stock That Could 5X as Prediction Markets Explode

Sometimes, companies and investors ought to be careful about what they wish for. Genius Sports (GENI +2.76%) and Sportradar (SRAD +3.02%) are arguably good examples of that sentiment. At their cores, Genius and Sportradar are sportsbook data providers. Still, over the years, some analysts have argued the shares should be treated more like SaaS stocks

Wall Street Says the Stock Market’s Return in 2026 Will Beat the 30-Year Average

Nearly 5,500 companies were listed across U.S. stock exchanges as of the first quarter of 2026, according to the Security Industry and Financial Markets Association (SIFMA). Of those companies, the 500 largest ones that are domiciled in the U.S. are included in the S&P 500 (^GSPC +0.80%), an index that is generally synonymous with the

2 Breakout Growth Stocks You Can Buy and Hold for the Next Decade

One of the best ways to find great growth stocks is to identify companies with accelerating revenue growth and the potential to deliver durable long-term growth. These are the type of breakout growth stocks that can turn into multibaggers in your portfolio. Right now, it is difficult to find these types of businesses trading at

The Federal Reserve’s Interest Rate Dilemma Is About to Go From Bad to Warsh — and the Stock Market May End Up Paying the Price

One of the greatest aspects of putting money to work on Wall Street is the disproportionate nature of investing cycles. While bear markets are normal, healthy, and inevitable, bull markets last substantially longer. It’s why the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) ascend to new highs

Want Safe Income While the Market Wobbles? Buy This Dividend Stock With $5,000.

Amid geopolitical turmoil and struggles with affordability, some investors may be looking to de-emphasize growth in favor of stable dividend stocks. This may make sense as such stocks tend to sell recession-resistant products, and the responsibility of maintaining a dividend tends to engender more conservative management. Such conditions describe the stock of TJX Companies (TJX

Will There Be a Stock Market Crash Under President Donald Trump? One Forecasting Tool With 155 Years of History in Its Sails Offers an Answer.

Since the late 1890s, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI) or benchmark S&P 500 (SNPINDEX: ^GSPC) have risen in 26 of the last 33 presidential terms. But under President Donald Trump, annualized returns for the Dow, S&P 500, and growth-stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC) have been higher than most other presidents. During Trump’s

With the stock market at record highs, should I invest now or wait?

Image source: Getty Images The stock market is at record highs right now, but the next crash somehow feels like it’s just around the corner. So what should investors do? It’s not easy to find attractive buying opportunities in this kind of situation. But that’s exactly what I’m looking to do. My views on this

0
Would love your thoughts, please comment.x
()
x