8 tips for investing wisely in ETFs

Buying ETFs has never been easier. Yet the convenience can also represent a pitfall. These tips can help you take a more considered approach to investing and avoid common mistakes.

ETFs have been on the rise for years. Investors have placed around USD 19.5 trillion in ETFs worldwide (source), a number which only represents a small proportion of the total amount of assets under management. However, the shift from actively managed investment funds to passive ETFs continues unabated. In the US, there are actually now more ETFs than individual shares (source).

An ETF (exchange-traded fund) is an investment fund that tracks an index and is traded on the stock exchange like a share. It allows you to buy a diversified portfolio in one transaction, without having to select individual shares yourself.

And it is thanks to this democratisation that investing has become a piece of cake. Yet this is exactly where things can sometimes go wrong. Here are a few tips for considered investing in ETFs…

1. 'Global' isn't always what it seems

ETFs that track global markets are very popular. Their appeal is understandable – with one ETF, you invest in companies all over the world and across a range of sectors. Right?

Anyone buying an ETF on the popular MSCI World Index may think they have the whole world covered in their portfolio. However, the name is misleading, as the MSCI World Index only tracks developed markets and excludes emerging and frontier economies, resulting in the coverage being more limited than the name suggests. Countries such as China, India and Brazil, for example, are not included.

What's more, the index is highly concentrated. The ten largest stocks are all American and together make up more than 24% of the index, while the US accounts for 70% of the weighting in the index overall (source; situation as at 16 March 2026).

Anyone who wants exposure to emerging markets can opt for the MSCI ACWI (All Country World Index), which covers both developed and emerging markets and tracks around 2,500 large and medium-sized companies in forty-seven countries.

The difference in returns over the past ten years has been relatively small, with 12.23% for the MSCI World compared to 11.85% for the MSCI ACWI (source; situation as at 16 March 2026. Note: Past performance is not a reliable indicator for the future). On the other hand, the ACWI offers a wider geographical spread, but still favours US-based stocks with a 61% weighting.

There is no wrong answer when it comes to choosing between the MSCI World and MSCI ACWI. Yet making a conscious decision – and taking a deep dive below the surface – is exactly what distinguishes a good ETF strategy from an impulse buy.

2. ETFs are not toys for traders

The average investor is holding their investments for shorter and shorter periods. In the 1970s, investors held their positions for nine years on average. Today, this is down to barely six months (source).

That's no coincidence, however, as investing online is easy and the regular flow of news and price updates means it is tempting to react to market movements in an instant. Yet ETFs are not designed as a trading vehicle; rather, they are made for anyone who prefers patient, diversified investments.

People who buy or sell too often also pay more in transaction fees and risk missing out on the best trading days. Research shows that long-term investors outperform those trying to time the market (source).

You should always ask yourself when you may need the money before making a purchase. If you think you'll need it within three years, an equity ETF may not be your best option. If, on the other hand, your horizon is five years or more, you'll have the time to ride out any temporary price falls, which is one of the benefits of ETFs.

3. Taxation – check where your ETF is registered

You pay a tax on stock exchange transactions for every buy and sell order in an ETF. Most ETFs available in Belgium are registered in Europe and not in Belgium. In this case, the standard rate of 0.12% applies. However, the tax authorities make a distinction once an ETF is registered in Belgium – distribution ETFs (which pay dividends) remain taxed at 0.12%, while accumulation funds pay the maximum rate of 1.32%, which is more than a tenfold increase.

It's therefore worth checking whether your ETF is registered in Belgium and whether it is a distribution or accumulation fund. This information can be found in the Key Information Document (KID).

You pay 30% withholding tax on dividends from distribution ETFs. In the case of accumulation ETFs, dividends are automatically reinvested, meaning you do not pay this tax. This will have an effect on the return over a longer period of time through compound interest. An accumulation ETF that is not registered in Belgium generally yields the lowest combined tax burden.

Not every tracker is an ETF

The term 'tracker' is often used as a synonym for ETFs, but that isn't quite right. Trackers fall under the broader category of ETPs (exchange-traded products) and can take three forms: ETFs (exchange-traded funds), ETCs (exchange-traded commodities) and ETNs (exchange-traded notes).

The distinction is not just a technical one, as the differences between ETFs on the one hand and ETNs/ETCs on the other can be significant in terms of collateral, tax impact, counterparty risk and more.

In short, you should always check whether you're buying an ETF, an ETC or an ETN. This information can be found in the Key Information Document (KID).

4. Costs add up, even if they seem small

An ETF with a total expense ratio (TER) of 0.20% sounds cheap. And that's true compared to an actively managed fund that may charge 1.5% or more. Yet over an investment horizon of twenty or thirty years, even small differences in costs add up to significant amounts.

You should bear in mind, however, that just because an ETF may be the cheapest, it doesn't mean it's the best. You should also note the tracking difference, which is the difference between the ETF's return and the return of the index it tracks. Some trackers perform better than their TER suggests, while others lag behind the index.

5. Buying more ETFs doesn't necessarily result in diversification

A common mistake both novice and experienced investors make is continuing to buy ETFs on the assumption that more positions automatically yield greater diversification. That isn't always true.

If you hold both an MSCI World ETF and an S&P 500 ETF in your portfolio, you are investing in the same US tech giants twice. Anyone who also buys a Nasdaq tracker will further increase their concentration in a handful of megacaps. This will result in apparent diversification, but a highly concentrated portfolio in reality.

Real diversification means gaining exposure to assets that are different: shares and bonds, large and small companies, or developed and emerging markets – supplemented by other asset classes if needed. This can often be achieved with a handful of carefully selected ETFs.

6. Rebalancing your portfolio every so often is worth it

While an ETF portfolio requires little active management, leaving it alone isn't ideal either. Over time, the weightings of your positions may shift as some assets rise faster than others. A portfolio that started with 70% equity ETFs and 30% bond ETFs may have quietly evolved to 85% equity ETFs after a strong year. You will then bear more risk than you originally intended.

Rebalancing is the solution, and research shows that doing so on an annual basis is the best option for most investors. Rebalancing too often, such as every month or quarterly, doesn't yield better results, but does increase transaction fees (source). Set a fixed date in your calendar to check whether your portfolio distribution still matches your original plan. A deviation of more than five to ten percentage points is a sign to make some adjustments.

7. Watch out for niche ETFs

The ETF market has exploded in recent years. In addition to traditional index funds, there are now trackers available for almost every conceivable theme: hydrogen, cleantech, cannabis and quantum computing to name a few. Some return brilliant performances over a period of time. Yet history also shows that some niche ETFs only become hugely popular with investors after a strong rally (and therefore at a high price).

That doesn't mean sectoral or thematic ETFs are to be avoided by any means, but rather they should be kept to a more limited part of your portfolio alongside a broad core position. The foundation should remain a broadly diversified portfolio.

8. Read the KID, even if you only do so once

Most investors never read the Key Information Document (KID). However, the KID tells you exactly what you need to know: which index the ETF tracks, what it costs, how high the risk is, where it is registered and whether it is an accumulation or distribution ETF. The latter two points are particularly relevant for Belgian investors, too. Reading the KID takes a little time, but it will allow you to make an informed decision. Before investing, be sure to read up on the key features and risks of financial instruments.

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