Stocks Versus ETFs: Which is Better to Invest In?

Well first off, what is an ETF? ETF stands for exchange traded fund and they are assets typically comprised of stocks from multiple companies bundled together. ETFs can also be made up of commodities, bonds, or a mixture of investment types. ETFs are traded on exchanges just like stocks are. The Standard and Poor’s 500 Index, or S&P 500, by far the most famous ETF. The S&P 500 represents the 500 largest companies and is often used as a measure for how the U.S. economy is doing.

What is the best ETF? There is no right answer for that. There are numerous different types of ETFs that you could potentially invest in such as bond (might include government, corporate, or state bonds), industry (track a particular industry such as technology, banking, or the oil sector.), commodity (gold, oil, etc.), and currency (Euro, Yen, etc.) ETFs. There are even inverse ETFs comprised of stocks you’re shorting.

So what exactly is a stock? Stocks are shares of a publicly traded company that people can buy and sell on exchanges like the NYSE and Nasdaq. Companies that want to sell stocks go through an IPO process where they are valuated and establish a number of shares they want to allow the public to purchase. Once a target IPO price is established and they can start being traded, then it’s up to the supply and demand of shares that drives stock prices up or down.

Now that we’ve clarified exactly what the difference is between the two, which is better? That depends on your strategy. Purchasing stocks gives you the opportunity to focus on the companies that stand out within their given industries or that you feel are undervalued. ETFs are good for the longer term and a good way to diversify your portfolio because they can give you access to many stocks across various industries.

I currently don’t have any ETFs in my portfolio but I am going to start researching them more. I’ve been keeping an eye on ARKK and ARKF, both are popular tech ETFs managed by famous investor Cathie Wood. What are your thoughts on ETFs vs. stocks? Leave me a comment and let me know. Follow my Twitter @VanceAlm where I’m constantly posting articles and blogs about news in the financial word.

Photo by Patrick Weissenberger on Unsplash

Author: vancealm

Working as a manager within two of the largest retail companies for the past 7 years has given me insight into consumer trends and essentially what people are buying on a normal basis. Why is that useful? Because it gives me a better understanding of the established and growing brands and companies that could potentially work to make YOU money. My name is Vance Alm and I am currently working on earning my MBA from the University of Nevada, Reno. I want to talk, teach, and find out more about investing in the stock market. Recently, there has been a lot of news around the stock market, hedge funds, and normal retail investors which has reignited the nation’s curiosity about investing their money. A lot of people want to be involved with the excitement of potentially making money by investing in the stock market, but they don’t know how or even where to begin. I want to explore the world of investment banking with you and talk about everything involved, from researching different companies to invest in, to the different online platforms or financial service companies you can use and everything in between. I am not a wealthy hedge fund manager and I am not an expert in the field, but I am passionate about the idea of having your money work for you. I am always learning more on the topic and I want to open the conversation on how to start investing and what companies to potentially invest in.

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