Should You Aim to Pick Winning Stocks, Invest in ETFs, or Both?

What is the best investment strategy? Where allocate your money? Pick the winning stocks, invest in ETFs, or both? Let's find out!

Updated on September 20, 2022
Should You Aim to Pick Winning Stocks, Invest in ETFs, or Both?

Investing can have a lot of benefits for people who do it right. However, ‘doing it right can be easier said than done, especially if you have no investment experience, but no worries, we’re here to help you start your investment approach and explain if you should aim to pick winning stocks, invest in ETFs, or do both.

Do you want to pick winning stocks, invest in an exchange-traded fund (EFT), or entirely?

Well, there are many different ways to figure out how to start investing and many differences between investing in stocks and EFTs.

This article will show how you should invest in both stocks and ETFs and the benefits and risks of doing both.

What Are Stocks?

A stock is an investment representing a percentage of ownership in a company. You can benefit from owning enough stocks and shares in a company. And, of course, some stocks are better than others. Moreover, you can gain even more benefits if you pick winning stocks in big companies for your investments.

How To Invest in Winning Stocks?

It is essential to keep abreast of market news and opinions. Reading financial news and following industry blogs from authors you care about is a form of passive research. News articles or blog posts can form the basis of an investment thesis.

The underlying argument might be a common-sense observation. For example, you might find that emerging markets are creating a new middle class that demands a wider variety of consumer goods. Therefore, the demand for certain products and commodities will increase.

What Are ETFs?

An ETF is similar to stock because you buy them at a stock exchange. And they also have a lot of benefits for those willing to invest in ETFs. There are several different types of ETFs. And bought and sold whenever the stock exchanges are open, and easy to trade and buy/sell at any time of day.

How To Invest in The Winning ETFs?

Passive index funds are generally best for beginners. And index funds are cheaper than actively managed funds, and the reality is that most actively managed funds will never outperform their benchmark index over time.

With that in mind, here’s a list of ETFs and a brief description of what each one invests in for beginners just starting to build their portfolios.

ETF Examples: 10 of the Best ETFs for Beginners

  1. Vanguard S&P 500 ETF — Large U.S. companies
  2. Schwab U.S. Mid-Cap ETF — Midsize U.S. companies
  3. Vanguard Russell 2000 ETF — Smaller U.S. companies
  4. Schwab International Equity ETF — Larger non-U.S. companies
  5. Schwab Emerging Markets Equity ETF — Companies from countries with developing economies
  6. Vanguard High-Dividend ETF — Stocks that pay above-average dividends
  7. Schwab U.S. REIT ETF — Real estate investment trusts
  8. Schwab U.S. Aggregate Bond ETF — Bonds of all different varieties and maturity lengths
  9. Vanguard Total World Bond Fund — Includes international and U.S. bonds of various sizes and maturities.
  10. Invesco QQQ Trust — Tracks the Nasdaq-100 Index, which is heavy on tech and other growth stocks.

You may find that this list weighs heavily on Vanguard and Schwab. There’s a good reason for this: Both are dedicated to offering Americans access to the stock market at a minimal expense, so ETFs from both tend to be among the cheapest in the business.

Use a Platform Where You Can Easily Buy & Sell Stocks and ETFs

No matter which one you want to pick for your investment. You need to find a good investing platform that allows you to buy and sell stocks and ETFs without spending too much time and money just trying to figure the website out.

Platforms like sofi wealth management and other websites are great platforms to get started with investments. However, the platform you use to make your investments is just as important as the type of investments you make yourself.

So pick the right platform and select the correct items and companies to invest in the winning stocks or ETFs. Moreover, it may take some time to understand all this when starting. But once you have an idea, you can invest in everything you want like a pro!

Which One Should You Pick?

Stocks are great for any company with a wide dispersion of returns, especially in the retail sector, where stocks can fluctuate through the market. However, ETFs can benefit companies with a narrow dispersion of returns. And can also be great for companies that don’t have clear performance drivers; ETFs can be beneficial in reducing risks.

While the retail sector may be the best for stocks to invest in, ETFs use winning sectors like technology. For example, if you are waiting for a biotechnology industry investment, you might pick an ETF because things like new drugs need to be approved by the FDA. If the drug is, investors have a bright future; if not, they face a bleak future. ETFs are more flexible and can reduce risk.

Your Turn To Invest in Winning Stocks and ETFs

You must always look at risks and potential returns whenever you invest, and picking between stocks and an ETF is no different. Of course, you should use stocks if you’ve got a wide dispersion of returns from the mean. But if there’s a narrow dispersion of returns, pick an ETF for your investment. And you’ll get a good return either way.