New Single-Stock ETFs Are ‘Recipe For Disaster,’ Experts Say

Retail traders just got a new tool to make bigger bets on their favorite stocks, but advisers are warning about outsized risks.

The first single-stock exchange-traded funds earlier this month, providing an easy way to magnify returns or bet against volatile companies like Tesla Inc. and Nvidia Corp. Unlike typical ETFs, which include dozens of stocks or bonds, these new products concentrate on just one security.

At a time when the market is experiencing wild swings and recession risks are growing, single-stock ETFs have the potential to entice amateur investors into speculative trades. US regulators have voiced concerns about the products — which have existed in Europe for years — but ultimately approved their release.