Advisors Warn ETF Mistakes Could Erode Long-Term Returns as Market Nears Record High

Demand for exchange-traded funds (ETFs) continues to surge as investors seek low-cost, tax-efficient options, but financial experts caution that common errors could undermine long-term gains. The global ETF market has climbed past $11 trillion, near a record high, with $511 billion of inflows in the first half of 2025, according to a new report from Cerulli Associates.

Despite this rapid growth, advisors say many investors fail to understand what they are buying, leaving their portfolios vulnerable. Certified financial planner Jay Spector, co-chief executive officer of EverVest Financial in Scottsdale, Arizona, said, “We are seeing some common mistakes that can quietly erode long-term returns.”

The U.S. Securities and Exchange Commission’s recent rulings in late September could trigger the creation of more ETF share classes of mutual funds, further expanding the market. As products multiply, advisors emphasize the need for careful evaluation to ensure each investment aligns with personal financial goals.

Person holding money in front of multiple screens | Source: Pexels

Among the most frequent missteps, Spector highlighted the “herd mentality” of chasing performance. “Clients buy ETFs when they are performing well, without considering how the investment aligns with their long-term financial goals,” he said.

Patrick Huey, CFP and owner of Victory Independent Planning in Portland, Oregon, warned against “trend hopping.” “It’s tempting to jump into the newest AI, crypto, or thematic ETF after big headlines,” he said. “But these funds are often narrowly focused and volatile.”