Exchange-traded funds (ETFs) are one way beginners get started. This guide explains what ETFs are, what to consider, and how they fit into Alinea’s model portfolios. All investing involves risk, including loss of principal.

What Is an ETF?

An ETF is a fund that holds a basket of securities, such as stocks or bonds, and trades on a stock exchange throughout the day at market prices [1]. Some ETFs track an index, such as the S&P 500, which includes 500 large US companies. Others follow a sector or a strategy.

Potential Benefits

Spread across many holdings. One ETF can hold many companies, so your result does not depend on a single company. Diversification can’t guarantee against loss [2].

Costs. Total operating expense ratios for ETFs have often been lower than those of comparable mutual funds [1]. Expense ratios vary by fund, so check each one.

Trading flexibility. ETF shares trade on exchanges during market hours, so you can buy and sell throughout the trading day [1].

Risks to Understand

ETFs can lose value, depending on what they hold. Stock ETFs can be volatile, bond ETFs have their own risks, and some ETFs use complex or leveraged strategies that may be unsuitable for many investors [1]. Do not invest in something you do not understand.

Risk Tolerance

Risk tolerance is your ability to handle potential losses. If you get anxious when your investments decline, you might prefer a more conservative approach. If you are comfortable with more volatility, you might accept more risk for the possibility of higher returns. Higher potential returns come with higher risk.

Steps to Consider

1. Open an account. Choose a platform with clear information and educational resources.

2. Understand your risk tolerance. Think about how you would react to losses.

3. Research ETFs. Look at what each ETF holds, its expense ratio, and its risks. Historical performance does not guarantee future results.

4. Start small and diversify. Spreading money across several ETFs can reduce the impact of any one falling, but it can’t guarantee against loss [2].

5. Consider dividends. Some investors reinvest dividends. Reinvestment does not assure a profit or protect against loss.

6. Review periodically. Revisit your goals and holdings from time to time.

ETFs on Alinea

Alinea Invest, Inc. offers a mobile investing app. Investment advisory services are provided by Alinea Advisory Services LLC, an SEC-registered investment adviser and a wholly owned subsidiary of Alinea Invest, Inc. SEC registration does not imply a certain level of skill or training.

Alinea’s model portfolios are built from funds that hold a mix of ETFs. Alinea asks about your risk tolerance and assigns you one of four risk-based model portfolios by algorithm, then rebalances it monthly. The ETFs in the portfolios do not change on their own, and Alinea reviews them quarterly.

• Investing Playlists. Playlists are collections of stocks and ETFs organized around themes or interests. Some Playlists have their weights set by AI on a schedule, with no human review of the changes, and themed portfolios may be less diversified and more volatile.
• Recurring investing. You can set a fixed amount to invest on a schedule, including into individual stocks, an approach known as dollar cost averaging. It does not assure a profit or protect against loss in declining markets.
• Allie. Allie, Alinea’s AI assistant, is available in the Alinea app. It can explain your holdings, market news, and financial terms in plain language. At your request, Allie can also start a deposit, withdrawal, buy, or sell, and you confirm every transaction before it runs. Allie provides educational research and feedback only, does not provide investment advice or recommendations, and can make mistakes.

Brokerage accounts are held at DriveWealth LLC, member FINRA/SIPC, which is not affiliated with Alinea. SIPC protects securities customers of its members up to $500,000 (including $250,000 for claims for cash) if the brokerage firm fails financially. It does not protect against a decline in the market value of your securities [3]. Bank accounts are linked through Plaid, Inc., a third party not affiliated with Alinea, and we do not store your online banking credentials. SSL and 256-bit encryption help protect your data.

Frequently Asked Questions

What is a 2026 New Year’s resolution for investing?

It is a commitment to start or improve your investing habits during the year.

How long does it take to see returns on ETF investments?

There is no set timeline. Returns depend on market conditions and the ETFs you hold, they are not guaranteed, and they can be negative.

What makes ETFs useful for beginners?

ETFs can hold many securities in one fund, and their expense ratios have often been lower than comparable mutual funds [1]. They can still lose value.

What mistakes should I avoid when investing in ETFs?

Avoid making emotional decisions based on short-term moves, putting all your money into one ETF, and not understanding a fund’s fees and risks.

What are the expense ratios for Alinea’s portfolios?

Each ETF has its own expense ratio, which is listed in the fund’s prospectus. Alinea’s subscription fee is separate; see Item 5 of Form ADV Part 2A.

Disclosure

Advisory services are provided by Alinea Advisory Services LLC, an SEC-registered investment adviser and a wholly owned subsidiary of Alinea Invest, Inc. SEC registration does not imply a certain level of skill or training. Brokerage and custody services are provided by DriveWealth LLC, an unaffiliated registered broker-dealer and member of FINRA/SIPC.

This content is for informational purposes only and is not an offer, solicitation, or recommendation to buy or sell any security. All investing involves risk, including loss of principal. Past performance does not guarantee future results. Allie is educational only, does not provide investment advice, and can make mistakes. Some Playlists have their weights set by AI on a schedule, with no human review of the changes, and can be wrong. Alinea oversees the algorithm and monitors it for anomalies. Themed portfolios may be less diversified and more volatile. Alinea is not affiliated with the sources listed below, and their inclusion is not an endorsement. Alinea charges a subscription fee for its advisory services; see Item 5 of Form ADV Part 2A. Alinea’s support team handles questions about using the service only and does not provide investment advice.

See our Form ADV Part 2A, Wrap Program Brochure, and Form CRS at www.alinea-invest.com/legal/home. For more on Allie, see AI Allie – Disclosures & Terms of Use at www.alinea-invest.com/legal/ai-allie-disclosures-terms-of-use.

Sources

[1] U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, Investor Bulletin: Exchange-Traded Funds (ETFs) (investor.gov).

[2] U.S. Securities and Exchange Commission, Investor.gov, “Diversify Your Investments.”

[3] Securities Investor Protection Corporation (SIPC), What SIPC Protects (sipc.org).

‍