Most investors should avoid single-stock ETFs.

By The Exchange Team

Most investors see ETFs as an easy method to buy a diversified basket of companies reflecting an index or a theme.

However, there are now single-stock ETFs that allow for leveraged bets on particular stocks.

Regulators and consultants, however, caution that these products may be highly complex and risky for average investors.

How they work : ETFs include "swaps," contracts where two parties exchange cash flows of one asset for another.

Single-stock ETFs are better for day trading than long-term investment due to exaggerated losses, said the SEC.

While it's feasible to "maximise" returns if you properly predict an asset's movement, the downside is riskier, he said.

For example, if the underlying stock falls 10%, this product might fall 30% to 40%.