Should I Buy Stocks or ETFs? Beginner Investor
What is a Stock?
What is an ETF?
An ETF is also known as an exchange traded fund. An ETF is bought and sold just like a regular stock, but it has multiple companies in the ETF known as holdings. ETFs are considered less risky and less profit.
Should I Buy Stocks or ETFs?
Many people who buy stocks are believers in that company. And are willing to take on more risk in hopes that the company will grow more. There are a lot of things when considering buying a stock, like Earnings per share, price to earnings, long-term debt, companies competition, market cap, and a variety of other important fundamentals. When choosing an ETF to buy it's a lot easier, All you have to do is look at the expense ratio also known as commission per year and holdings in the ETF. A lot of people love to invest in ETFs because you get diversification. Also you could buy an ETF that has the top 500 companies in the United States in it like VOO, and diversify your portfolio without even lifting a finger. On average ETFs gain around 10%-12% per year in growth. I think smart investors should have both. I would recommend having around 40% of your portfolio into an ETFs that tracks the market and I would recommend having 15% of your portfolio in a bond (this is going to act as your defense and a falling market). Then I would put the rest into high quality stocks that have great future and dividend growth.