I would Prefer Exchange Traded Funds vs Stocks in 2013

Exchange Traded Funds vs Stocks

In 2013 I have decided to try investment slightly differently than my normal practice. Instead of buying direct stocks I would prefer exchange traded funds vs stocks in 2013. My concern regard stock volatility and market unpredictability has forced me to think differently. Majority of my funds I have decided to allocate to equity linked mutual funds and balance I will use for ETF’s. I will also recommend this approach to my readers to select exchange traded funds vs stocks. My studies says that in coming years probably exchange traded funds will become first choice of investors over stocks. The way we get exposure to equity (without lot of fees like Mutual Funds) with minimum of risks (compared to direct stocks) tells us that exchange traded funds can be our choice for 2013.

Suppose we want to buy stocks relate to Infrastructure sector, instead of buying individual stocks of that sector we can buy Goldman Sachs Infrastructure ETF. In order to do this we must know what type of ETF’s are available in market. ETF can be our best alternative to direct stocks. In this article I will give you list of ETF and their sector reference so that we can make a choice of exchange traded funds vs stocks.

In India Exchange Traded Funds has become popular as an alternative to physical gold investment. Though I am personally not such a big fan of gold ETF (as alternative of physical gold) but it has given me idea about effectiveness of ETF’s. Now I am hundred percent confident that exchange traded funds are perfect alternative to direct stocks. The advantage of exchange traded funds over mutual funds is that investors can buy ETF like stock. Using my online trading account I can buy and sell ETF just like stocks. Instead of fees, brokerage is charged in ETF trading which is same like stocks.

The market price of exchange traded funds are almost same as Mutual Funds NAV. But for exchange traded funds its NAV vary every moment like stocks. NAV of mutual change only once is a day (at day end). Like stocks higher demand will lead to market price appreciation of exchange traded funds.

It is only obvious that people compare mutual fund with ETF. The advantage that stocks enjoy over mutual funds are applicable for ETF over mutual funds. Exchange traded funds carry almost all advantages of stocks and mutual funds combined. For new investors, exchange traded funds can be the best alternative to direct stocks. As you can trade ETF’s in real time just like stocks, it give lot of interest to common investors to try their hands on investing in ETF.

List of Exchange Traded Funds with its Sector References:

Conclusion

If you are confused if you should invest in exchange traded funds vs stocks, one must always consider how mush risk one can take for a needed return. While investing in direct stocks the risk associated with investment is too high. Exchange traded funds allows perfect balance between risk and returns. To understand direct stocks volatility and associated risk, one must have sufficient knowledge of the sector. If one does not have such knowledge it is better to go with exchange traded funds vs stocks.