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What Should You Pick To Invest In, Stocks Or ETF's?

Well there are many different ways to choose if you should invest in Stocks or ETF's. Now if you are new to the stock market and know so little that you don't know what stocks are and ETF's than here you are. Stocks are individual pieces of a company that you buy, and if the company does well then the price of a share goes up and you gain money, if it goes in the opposite direction then you lose money. ETF's are pretty much the same thing only they contain multiple stocks in a "portfolio". ETF's are just like Mutual Funds but can be bought or sold electronically. Now back to the original article.

Now a way to determine if you should invest in one of the two is your age. Different ages should have different risk, and stocks tend to be more risky then ETF's because it doesn't have other stocks to offset any bad days. Now the common thought is, "The younger are the more risk you should take, and the older you are the less risk you should take." Now this is true because if you are 25 and you go to 30 and you have losses in your portfolio then you have 35-45 more years to invest and have gains in the portfolio, this allows for more risk. But if you are 45 and you go to 50 and have losses then you only have 15-25 years to off set those losses, this allows for less risk. So how do you think of more risk.

When most people think of risk they think of bigger reward, it means that you have chances for bigger gains but sometimes with higher risk you get the same gains as with low risk. And it is even unusual for a risky stock or ETF to have big gains. So if you get the same amount of gains but more loss if you have it, then why wouldn't you invest in a stock or ETF that has the same gains but will most likely have less losses if they occur. The reason is that people are automatically drawn to the thought of a slight probability of bigger gains. Its just how it is. But if stocks are riskier than ETF's then which is safer a risky ETF or a safe stock?

Well the answer in my mind is risky ETF. Why, it risky you will ask, it's because no stock can be for sure safe, but that is the same thing for ETF's. But a risky ETF usually contains risky stocks too, but those stocks will offset each other, and that is the main reason why any level of risky ETF is safer then even the "safest" stocks. An example is, if you look at your portfolio and you have lets say 10 stocks in that portfolio then just one bad stock won't send the whole thing down if it is weighed evenly with the other stocks. So that's why multiple stocks is safer than just one stock in a portfolio. So a lot of stocks in a portfolio is safe right. Now put ETF's in there, you are pretty much putting portfolio's in a portfolio. Now look at that, don't you think that sounds safe, well that's because it is. Now all you need to do to find what you should invest in is find your age risk that you should have and then determine if your a conservative investor or risky and also don't be afraid to invest in both.