Market Risk
ETFs are susceptible to market volatility as they track underlying assets. Fluctuations in gold prices, interest rates, or economic conditions impact ETF values. In a market downturn, ETF values decrease, affecting the portfolio’s overall worth. This risk is inherent, but thorough analysis of underlying assets and diversification across sectors or regions can mitigate its impact.

Liquidity Risk
Limited trading volumes in one ETFs can lead to difficulty in buying or selling at desired prices, especially during market turbulence. Low liquidity may result in wider bid-ask spreads, causing investors to transact at less favorable prices. Assessing an ETF’s liquidity through trading volumes and market depth helps mitigate this risk, ensuring easier execution of trades and minimizing potential losses due to illiquidity.

Diversification Risk
The limitation of one ETFs in the portfolio heightens diversification risk. This constraint increases exposure to specific sectors, magnifies losses from poor performance, and relies heavily on ETF manager decisions. To mitigate, thorough research, strategic asset allocation, and periodic rebalancing are crucial. Consider supplementing with complementary investments if allowed. Regular monitoring is essential to adapt to market changes. Despite limitations, careful selection and management within these constraints can help reduce vulnerability to market fluctuations and enhance portfolio resilience.