When I was first learning about the Stock Market, I really only paid attention to individual stocks. I really loved the idea of picking your favorite companies as well as finding new companies to invest in. While I still do pick individual stocks and have my own personal convictions for why I have chosen them, a larger part of my portfolio is now within Index Funds and ETFs.
Why pick these over individual stocks? There is a simple answer, but we as human beings really love to complicate things. When you invest in an index fund or an ETF, you’re capturing a piece of the market, and not just an individual stock. When a stock goes down, but the sector doesn’t, you are in a safer boat owning multiple companies, and not just the one taking a hit. Sometimes it isn’t the sector that is having an issue, but it may be an individual stock that is. Owning the sector allows you to capture the gains of the stocks having a good day.
The same goes for the Index Funds, like the SPY. This index fund captures the top 500 companies of the S&P 500, allowing you to own a large chunk of the market. If the market is having a good day, you’ve captured that by owning a basket of stocks, rather than individuals. There are many different index funds that capture other parts of the market, certain sectors, technologies, or even the entirety of the market. Searching around, you will soon become inundated with ETFs and Index funds that capture enough to make your head explode. Do some research before you set out to invest in these, you want to pay attention to management fees, what stocks the funds or ETFs are holding, and do those reflect your investing values?
Picking individual stocks is a risky game, because you need to find out so much more about the business. How is the management, how is the debt, are they paying their debt, are they earning a good price per share? Looking at the book selection of picking stocks, you will see there are 1,000’s of ways to do this, with no particular right or wrong answers.
I read an article that had an animal throwing darts at a board that had stocks listed. They bought whatever the animal had hit with the dart, and had the same luck as any stock picker may have had. That is telling, because even though you may be doing research and think you know everything about that business, it doesn’t mean the stock will go up or that the company isn’t having difficulties next quarter.
I personally invest in ETFs, Index Funds, and individual stocks. I think about what I like to buy as a consumer, or what services, and products I use regularly. Then I go and do some research, purchase those stocks, and with any luck they may go up. With the Index Funds and ETFs though, I can keep continually purchasing shares, not have to do much research, because usually the name of the fund or ETF will tell you what the goal of it is.
I know that buying Index Funds and ETFs isn’t exciting, you may even think it’s boring, but shouldn’t it be that way? Shouldn’t you be able to allow your money to work for you without having to constantly adjust or look into the items that may be troubling a single business? If you want to invest in Lithium for Electric Vehicles (EV’s) there are many ETFs that allow you to capture the market on Lithium, instead of trying to find that one company that does it better than the rest. If you want something for Fintech, there are ETFs that hold a basket of stocks that are the next generation of apps, financial technology, or some current ones.
If you love doing research, you can always research ETFs and Index Funds the same way, but gives you a broader look at the sector or market. You just don’t need to invest so much time in individual companies. Looking to invest, but don’t have the time for research, even better. ETFs and Index Funds give you the basic information by the title of their funds. If you have the time, but don’t know how to read financial statements yet, then again, ETFs and Index Funds give you the opportunity to start investing, with better chances than purchasing individual stocks.
Sometimes, boring is better. Boring is fine when it comes to growing money. Let us know what ETFs and Index Funds you own or are looking to own!
Thrifty Investing 
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