The Magnificent 7 account for roughly a third of the entire S&P 500, so it's understandable that some investors might consider focusing an outsized portion of their portfolio on either one of these stocks or a similarly-sized titan of the market. At the same time, single-stock exchange-traded funds (ETFs)—funds that take the common diversification tactic of ETFs and flip it in order to provide leveraged exposure to a single name—have proliferated quickly. There are now hundreds of them available to investors.
The attraction of single-stock ETFs is strong: after all, many of the biggest companies in the world have a long history of outperformance, and these funds can provide double or even triple returns in some cases. However, the risks to these funds are sizable as well. Below are several single-name funds that investors have flocked to, along with a word of caution for those considering this approach.
