There's a number of risks associated with ETFs that isn't associated (or less) with individual stocks. As a rule of thumb you might assume that if the index go

There's a number of risks associated with ETFs that isn't associated (or less) with individual stocks. As a rule of thumb you might assume that if the index goes down, the index fund will add 1-5% going down (large index funds only), and if the index goes up, the index fund will "lose" 0.1-0.5% of that value going up. ETFs are similar. Why ? Lots of reasons: 1) gating (during periods of heavy activity, the adding or removing shares process can block. Additionally, due to new regulation the management of the ETF can impose this without recourse for you. So if the ETF drops 20% in an hour, but you notice this 5% into the drop and want out, chances are good you won't be able to) 2) slippage (due to time delays, contracts, fees, the fact that fractional share ownership doesn't exist, ...) $100 added to an ETF does not result in $100 increase in ETF value. This affects smaller ETFs more than larger ones, but it means that when the S&P 500 goes up 10%, SPY goes up 9.9% or so, when it goes down this makes the drop worse (so, say 10% -> 10.1%). There have been cases where slippage has been large, especially in smaller ETFs). Note that the reverse is also true, unless you're a billionnair (or at least dozen millionaire). Maintaining "your own", say, SPY equivalent account by owning individual shares will likely cost you more in fees than it would cost you to own the equivalent SPY shares. Additionally if you have less money than the ETF, you'll have to have a rougher approximation. 4) slippage due to add/removes from the S&P 500 index. Since the ETF will have to make suboptimal (very large) trades when the index changes, this will cause the value of the ETF to "slip" compared to the index itself. Putting it separately since it results in bigger amounts. So the SPY index tracks something between the S&P500 and this list : http://siblisresearch.com/sp-500-additions-removals/ http://siblisresearch.com/sp-500-additions-removals/ This has, in the past, affected the difference between an S&P 500 index and an ETF more during recessions and that will continue. 5) Global synchronization. Many people use an ETF like SPY as an alternative for a 50% bonds 50% stocks portfolio. Needless to say, this is less diversified, and carries more risk. 6) Generally speaking, an ETF is of course vulnerable to the same risks as the individual stocks, to a lesser extent. However, bad things will happen to the ETF when bad things happen to any large holding. The thing is that the odds go up much faster than I bet people would expect. Let's say the odds of something really bad (getting economic sanctions, default, bankruptcy, ...) happening to a top-10 S&P 500 company are 1% (happens once every century). We all (should) know the formula that determines risk across SPY as a result of that, but do you know what value it gives for this scenario ? It's just shy of 10%. So under these assumptions you can expect a 6-7% drop in the SPY etf every decade that won't be reflected in the index (index can, "for free", just remove failed stocks and replace them, the ETF can't). I hope you agree those are reasonable assumptions.