Highlights

• ETFs provide diversification and cost efficiency.

• Individual stocks can deliver higher rewards but with greater risks.

• Investor goals should guide the choice.

Exchange-traded funds (ETFs) have become a cornerstone of modern investing, yet many investors continue to rely on individual stocks to pursue higher returns. Each approach offers distinct advantages.

ETFs: Diversification Made Simple

ETFs allow broad exposure to markets or sectors in a single trade. They reduce concentration risk and provide cost-effective access to global markets. For many investors, ETFs are a convenient way to build a diversified base portfolio.

Individual Stocks: Concentrated Potential

Owning individual stocks can deliver outsized gains if a company performs exceptionally. However, it also exposes investors to greater downside risks, since a single negative development can significantly affect returns.

Balancing the Two

Many investors use ETFs for broad market exposure while selectively holding individual stocks for additional growth potential. This combination balances diversification with targeted opportunities.

Outlook for Investors

In a world of persistent volatility, ETFs offer stability and structure, while individual stock picking allows investors to pursue higher rewards where conviction is strong. The most resilient portfolios often include both.