ETF Demand Soars as Experts Warn of Costly Investor Mistakes

Exchange-traded funds (ETFs) attracted $540 billion in new money in the first half of 2025—outpacing inflows during the same period last year—yet financial professionals warn that investor missteps could jeopardize long-term goals. Morningstar reported the surge, noting that companies launched 464 new ETFs through June, putting 2025 on track to surpass last year’s record of more than 700 new offerings.

“The rise of ETFs has been great for investors, but convenience can also breed complacency,” said Jon Ulin, certified financial planner and managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida. “The biggest mistakes aren’t about the products, but how investors use them.”

Financial chart on a laptop | Source: Pexels

Experts caution against several pitfalls. Jared Gagne, a CFP with Claro Advisors in Boston, urged investors to “look under the hood” of their chosen ETFs. While some funds track broad indexes like the S&P 500, others are narrow sector funds, thematic ETFs focused on trends, or leveraged ETFs that amplify both gains and losses. “If you don’t look under the hood, you may think you’re buying a diversified fund when in reality you’ve bought something extremely narrow and risky,” Gagne said.

Another common error is “chasing performance” based on past returns. CFP and CPA Michael Lofley of HBKS Wealth Advisors warned that rallying funds may not sustain momentum. Ulin added that rushing into buzzworthy ETFs such as bitcoin, cannabis, or clean energy can backfire: “These funds can fall just as quickly as they rose.”