2. Premium or discount risk
ETF units usually trade close to NAV, but that relationship can be stressed during volatile periods or when underlying markets are closed. Short-term premiums and discounts can hurt investors who use market orders at ill-timed moments.
3. Need for trading discipline
Intraday pricing can encourage overtrading for investors who follow every market move. Without guidance, this behaviour can undermine the very cost advantages that drew them to ETFs in the first place.
4. Product complexity in some segments
Leveraged, inverse, commodity, and other specialized ETFs can behave in ways that your clients find hard to predict. These products need careful explanation and, in some cases, might not suit long-term goals.
Mutual funds pros
Mutual funds also offer meaningful benefits, even in an environment where ETFs attract a lot of attention:
1. Ease of use for many households
It is straightforward for your clients to hold mutual funds through banks, insurers, and full-service firms. They can invest fixed dollar amounts and rely on automatic fractional units. They can also avoid having to place trades on an exchange.