ETFs offer advantages over stocks in two situations. First, when the sector's stock returns are narrowly dispersed around the average, an ETF may be the best option. Second, if you can't gain an advantage through company knowledge, an ETF is your best option. If you're just starting to invest, you might be wondering if it's better to invest in stocks or ETFs.
Stocks can be a great investment in some circumstances, while ETFs may be better in others. However, for new investors, exchange-traded funds solve many problems and are a simple way to obtain attractive returns, making them an excellent starting point. ETFs can offer lower operating costs than traditional open funds, flexible trading, greater transparency and better tax efficiency in taxable accounts. Exchange-traded funds (ETFs) take the benefits of investing in mutual funds to the next level.
However, there are drawbacks, such as negotiation costs and product learning complexities. Most informed financial experts agree that the advantages of ETFs outweigh the disadvantages by a significant margin. Check out NextAdvisor's list of the best online brokers if you want to select your own investments, including individual stocks or NextAdvisor's list of the 10 best ETFs.