ETF v praxi
When NOT to Buy a New or Trendy ETF: Warning Signs
Key takeaways
- An ETF with a short track record (under 3 years) has no proven behavior across different market conditions.
- A small fund size (under EUR 100 million) increases the risk of closure or poor liquidity.
- Thematic ETFs often have high concentration in a small number of companies — the "story" premium means higher TER and volatility.
- Launching a new ETF after a period of strong performance on a theme is a classic warning sign.
- Trendy hype does not guarantee future performance — last year's hot topic may not work for the next 10 years.
The most dangerous moment to buy a thematic or new ETF is when everyone is talking about it — because at that point, "optimism pricing" is almost certainly already built into the price.
Warning sign #1: the fund just launched after strong performance
Most thematic ETFs are created in response to what has performed well in recent years. Crypto-focused ETFs launched en masse when bitcoin was hitting highs. Clean energy ETFs multiplied when green policy was pulling markets. The fund provider responds to investor demand, not to predicting the future. If the fund launched only a year ago and the theme is still making headlines, you have a red flag.
Warning sign #2: high concentration and a small fund
Thematic ETFs often have 50–80% of assets in their top 10 positions. This means "diversification" is only superficial — you are essentially buying a handful of companies wrapped in an ETF shell. Moreover, if the fund's assets are below EUR 100 million, there is a risk of:
- Wider spread when trading.
- Fund closure (liquidation or merger) as interest wanes.
- Poorer tracking of the underlying index.
Warning sign #3: high TER
Thematic ETFs charge 0.35–0.75% per year, sometimes more. That is 3–7× more than a low-cost global ETF. You pay the premium for the "story" every year — regardless of performance. Read how fees destroy returns over 30 years.
What still holds
Sector or thematic ETFs can have a place in a portfolio as a conscious tactical bet. But only when you know precisely the risks involved, are prepared for higher volatility, and have a clear reason why this theme will outperform the whole market. The portfolio core is better built on All-World or S&P 500. More tips on choosing ETFs in the ETF guide.
FAQ
Why are new thematic ETFs riskier?
They have no track record across different market cycles, tend to be concentrated in a small number of companies, and are most often launched after a period of strong theme performance — when assets are already expensively priced. Add a higher TER and you have a combination of higher costs and uncertain returns.
How large does a fund need to be to be safe?
EUR 100 million is cited as a rough minimum. Below this, the risk of fund closure, poorer index tracking, and wider spreads increases. Large funds with billions of EUR in assets are the safest in this regard.
Are thematic ETFs always bad?
No. They can have a place in a portfolio as a deliberate tactical bet — but only as a minority alongside a broad global index. The key is to understand the concentration and costs and consciously accept the higher volatility.