Is investing in stocks, ETFs, and other assets risky?

The market prices of stocks, ETFs (exchange-traded funds), and other assets typically fluctuate — sometimes dramatically — an effect known as “volatility.” If you buy an asset and its value drops, then sell it, you’ll have taken a loss.

It’s important to be aware that past performance is not necessarily an indicator of future performance. In other words, there is risk involved even on assets with a history of positive performance.

Before making an investing decision, we recommend you take time to research and keep up to date with the assets you’re buying or selling, as well as follow the stock market in general.

When investing, it’s important to understand your own appetite for risk and ensure this matches how you build your portfolio.

Although ETFs are a way to further diversify your assets because the issuer is investing in multiple companies, customers should be aware of their risk exposure and potential downside. Investing in ETFs involves risk including the possible loss of principal. Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. ETF shares cannot be redeemed directly from the ETF. ETFs are required to distribute portfolio gains to shareholders at year-end, which may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading may also have tax consequences. An ETF’s expense ratio is the annual operating expense charged to investors.

Learn more about investing, including potential risks, as the Securities and Exchange Commission’s investor.gov website.