Here's what you need to know: An index fund is not the same thing as an Exchange Traded Fund (ETF). Index funds can be ETFs, but not all ETFs are index funds.
This distinction matters because many new ETFs launching today are extremely risky products that can lose money faster than individual stocks and they charge you higher fees for the privilege.
What's the Difference?
Index funds are a type of investment strategy that owns thousands of companies to match the performance of market indexes like the S&P 500. When people say "just buy index funds," they're recommending this diversified, low-cost approach to investing.
ETFs (Exchange-Traded Funds) are just a way to package investments that you can buy and sell on the stock market. An ETF can hold an index fund strategy, but it can also hold anything else: single stocks, leveraged bets, cryptocurrency, or complex derivatives.
Think of it this way:
Index fund = The recipe (own thousands of companies)
ETF = The container (how it's sold to you)
You can get index fund investing through ETFs, but you can also get terrible investment strategies through ETFs.
The Dangerous New ETF Products
Wall Street keeps launching new ETF products because they're profitable, not because they help investors. In 2025, about 25% of all new funds launched were leveraged ETFs, mostly focused on single stocks. (source)
Single-Stock ETFs: Worse Than Just Buying the Stock
Companies like Direxion and GraniteShares now offer ETFs that track just one company, but with leverage. Instead of buying Apple stock directly, you can buy an ETF that tries to double Apple's daily moves.
Why this is terrible:
Higher fees: These ETFs charge around 0.95% per year. A broad market index fund charges 0.03%-0.05%.
Amplified losses: When the stock goes down, you lose twice as much money.
Volatility decay: Even when the underlying stock goes up over time, these funds often lose money due to daily rebalancing.
Concentration risk: You're betting everything on one company, plus you're using leverage.
These products take something that on average goes up (stocks) and change it into something that on average goes down (because of the debt used to amplify moves).
The Product Explosion
The pace of launches is accelerating:
MicroStrategy (a Bitcoin proxy company) had six new ETFs launched based on its stock in 2025 alone.
Companies are launching leveraged ETFs almost immediately after popular IPOs
There are now leveraged ETFs for individual cryptocurrencies like Solana and XRP
Think about this. With MSTX (Defiance Daily Target 2x Long MSTR ETF) you’re not buying bitcoin. You’re not buying a company that buys bitcoin. You’re not buying a fund that owns a company that buys bitcoin. Instead, you’re buying a fund that borrows money to buy a company that owns bitcoin and you’re paying extra to do it. (and if you paid attention to yesterday’s post, you know that some people borrow money to buy these leveraged ETFs!)
As an alternative, if you want Bitcoin exposure, perhaps you could just buy some rather than paying all sorts of fees to middlemen to do it for you?
Why Wall Street Loves These Products (And You Shouldn't)
Follow the money: ETF sponsors make money by multiplying assets under management by their expense ratio. A leveraged single-stock ETF charging 0.95% generates almost 20 times more revenue than a broad market index fund charging 0.05%.
The business reality: Only 58% of actively managed ETFs are profitable for their sponsors, yet new launches keep accelerating. Why? Because the profitable ones are extremely profitable, and the costs of failure get passed to investors who lose money in failed funds.
Making gambling easier isn't progress. Yes, these ETFs let you make leveraged bets on single stocks without borrowing money or trading options. But that's not a feature. It's a bug. These products make it easier for unsophisticated investors to take concentrated, leveraged risks they don't understand.
What You Should Do Instead
Stick to actual index funds. Look for ETFs that:
Track broad market indexes (S&P 500, Total Stock Market, International)
Have expense ratios under 0.20%
Hold hundreds or thousands of companies
Come from reputable providers like Vanguard, Fidelity, or Schwab
Red flags to avoid:
Any ETF focused on a single stock
Words like "leveraged," "2X," "3X," or "inverse"
Expense ratios above 0.50%
Companies like Direxion, GraniteShares, or other sponsors pushing complex products
ETFs that launched in the past year tracking trendy stocks or crypto
The Bottom Line
When financial advisors recommend "index fund investing," they mean buying diversified, low-cost funds that own thousands of companies. Many new ETFs are the opposite: concentrated, high-cost, leveraged bets that can lose money faster than individual stocks.
Don't let the ETF wrapper fool you. A terrible investment strategy doesn't become good just because it's packaged as an ETF.
Remember: The house always wins. Wall Street creates products that make them money, not products that make you money. The simplest, cheapest, most boring index funds have made more millionaires than any of these flashy new products ever will.
Stick to the basics. Your future self will thank you.