How to Avoid the Most Common ETF Mistakes

Exchange-traded funds (ETFs) have become go-to building blocks for both novice and seasoned investors, but as ETF options explode—and their marketing grows more complex—so does the list of easy-to-make mistakes. CNBC’s latest analysis spotlighted classic ETF missteps, from chasing hot performance and niche themes to overcomplicating portfolios with overlapping funds and hidden costs.

As I told CNBC for their article, the #1 trap I see is investors buying last year’s winners or trendy ETF flavors, rather than focusing on true diversification and clarity of purpose. “It's easy to think more funds equals more safety, but piling on new ETFs—especially sector, thematic, or leveraged varieties—often leads to costly overlap without adding real protection,” I shared. Instead, I advise clients to look for a clear, evidence-backed strategy and to regularly review their positions for unintentional duplication or style drift. Simplicity, transparency, and alignment with your actual goals almost always win in the long haul.

The article also emphasizes another key lesson: not all ETFs are created equal. Beyond chasing performance, investors often overlook the tax implications, underlying indexes, trading liquidity, and expense ratios that can quietly eat away returns—or amplify risk—in ways mutual funds or individual stocks might not. As ETF innovation accelerates, a disciplined, back-to-basics portfolio review is more important now than ever.

Bottom line:

Don’t let the sheer variety of ETFs—or the hype around their rapid growth—trick you into unnecessary complexity, higher expenses, or concentrated bets masquerading as diversification. As I reminded CNBC readers, “The best ETF portfolio is usually the one that’s easiest to understand and hardest to second-guess during market swings.” Stick to your plan, revisit your holdings, and never be afraid to prune for clarity and efficiency.