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The main risks associated with trading exchange-traded funds (ETFs) include:

• Market risk: ETFs are subject to market risk, meaning their value may fluctuate due to changes in the market or the underlying securities. This risk is inherent in all investments and can’t be eliminated
• Credit risk: ETFs investing in bonds or fixed income securities face credit risk, where the issuer may default on debt obligations. This risk is higher for ETFs holding lower-rated bonds
• Interest rate risk: ETFs investing in fixed income securities are subject to interest rate risk. Rising interest rates can reduce the value of these securities, negatively impacting the ETF's value
• Liquidity risk: ETFs may be less liquid than individual stocks, especially those tracking obscure or specialised markets, making it harder to buy or sell them in large quantities
• Management risk: actively managed ETFs are subject to management risk, where the fund manager's decisions may not be successful, leading to lower returns
• Tracking error risk: there can be differences between the ETF's performance and its underlying index or benchmark. This tracking error may affect the ETF's ability to accurately mirror the benchmark's performance
• Other risks: Investing in foreign equities involves additional risks such as political, economic, legal risks, and currency exchange rate fluctuations. For more information, check the Risk Description

ETFs provide higher diversification than single stocks, but this doesn’t guarantee profit or protect against losses in declining markets. Replicating the benchmark doesn’t ensure profits and may result in losses if the benchmark underperforms. Past performance isn’t indicative of future returns.

The above information is for general purposes only and doesn’t constitute financial advice. For personalised advice, seek professional and independent guidance. Revolut is not a financial advisor.