{"id":9760,"date":"2021-08-06T16:05:45","date_gmt":"2021-08-06T16:05:45","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9760"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"pros-and-cons-of-etf-investing-versus-stocks","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/pros-and-cons-of-etf-investing-versus-stocks\/","title":{"rendered":"Pros and Cons of ETF Investing Versus Stocks"},"content":{"rendered":"\n<p><em>Marianne F. from Kent, OH asks: <\/em>Hello Mitch, I\u2019m\nwriting to hear your thoughts about ETF investing versus owning individual\nstocks. I\u2019m in my late 40s and don\u2019t want to get too sophisticated with my\ninvestments. I just want something that works and is relatively easy. Thank\nyou.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for writing, Marianne. I think there are a lot of\ninvestors thinking along the same lines as you. In fact, I know there are \u2013\nsince the first passive index ETF was created, the total amount of US assets invested\n\u2018passively\u2019 has soared past $11 <em>trillion<\/em>, and there are now more passive\ninvestors than active ones. As of March 2021, passive index funds (all mutual\nfunds and ETFs) share of total invested assets is close to 52%.<\/p>\n\n\n\n<p>Investor interest in passive ETF\ninvesting is growing for good reason, in my view. ETFs allow an investor to\ngain broad diversification at a low cost, which is two advantages over the long\nterm. If an investor\u2019s goal is to<em> be<\/em> <em>the market<\/em>, but not <em>beat the market<\/em>, then that investor can implement a passive\napproach by selecting a benchmark and\ncommitting to it for their entire investment horizon.<sup>1<\/sup><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_08_05&amp;content=4_steps_to_managing_retirement_assets_guide\">Use These 4 Steps To Help You Prepare for Retirement!<\/a><\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_08_05&amp;content=4_steps_to_managing_retirement_assets_guide\"><br><\/a> &nbsp;<br>With the right guidance, retirement planning doesn\u2019t have to be a difficult process! Important factors that investors should consider before retirement include:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Determining your expenses<\/li><li>Determining your income<\/li><li>Matching your income source with your goals and time frame<\/li><\/ul>\n\n\n\n<p>Considering these factors can be a daunting task, but there are four simple steps that can help you plan for retirement! If you have $500,000 or more to invest, get the scoop on these simple steps with our guide. Click on the link below to get your copy today:<br> &nbsp;<br><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_08_05&amp;content=4_steps_to_managing_retirement_assets_guide\">Download \u201c4 Steps to Managing Your Retirement Assets!\u201d<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-4-steps-to-managing-retirement?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_08_05&amp;content=4_steps_to_managing_retirement_assets_guide\">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p>But I think there are some big issues with this approach\nthat many investors may not recognize or acknowledge. For one, I\u2019m not sure\nmany investors actually stick to the same ETF strategy and benchmark over long\nperiods of time. I often see portfolios made up of many ETFs, which tells me\nthat \u2018passive\u2019 investors are acting as active investors without necessarily\nknowing it. <\/p>\n\n\n\n<p>Actively managing an ETF portfolio can be good \u2013 we do that\nhere at Zacks Advantage. But we also have decades of experience in research-driven\ndecision making, and we review and analyze our decisions regularly. Based on\nyour question, it doesn\u2019t sound like you\u2019re up for that. <\/p>\n\n\n\n<p>Another issue is investor psychology. Doing ETF investing\nwell involves picking a benchmark and sticking to your ETF strategy long-term.\nIt does not mean trading in-and-out of ETFs when the market exhibits volatility\nor if market conditions suddenly change. For many investors, the temptation to\nshift around can run interference with an ETF strategy, which may ultimately\nmean not generating the long-term results you want and also underperforming the\nbenchmark.<\/p>\n\n\n\n<p>A final issue is with taxes. If this is a retirement\nportfolio where taxes are deferred, passive investing does not have to be an\nissue. But for taxable accounts, having ETFs does not give an investor much\nleeway for tax-loss harvesting and other strategies designed to control capital\ngains. <\/p>\n\n\n\n<p>These are some of the issues I would encourage you to\nconsider before committing to an all-ETF strategy, and it could make sense to\nestablish some guideposts and investment disciplines before proceeding. At\nZacks Investment Management, our goal is to deliver long-term results by\nactively managing our investments based on a research-based approach, and Zacks\nAdvantage does the same thing but with ETFs. Both approaches are driven by\ndecades of experience in research. <\/p>\n\n\n\n<p>In addition to our research, we also offer\ninsight into retirement planning. I recommend investors, especially those\nnearing retirement, to go through these four steps outlined in our guide \u201c4\nSteps to Managing Your Retirement Assets<sup>3<\/sup>.\u201d This guide will help\ngive you some ideas for how to transition into retirement with confidence.<\/p>\n\n\n\n<p>If you have $500,000 or more to invest, click on the link below to get your copy of \u201c4 Steps to Managing Your Retirement Assets.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>ETFs have become very popular for some good reasons\u2014but Mitch offers a few words of caution<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-9760","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9760","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9760"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9760\/revisions"}],"predecessor-version":[{"id":10341,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9760\/revisions\/10341"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9760"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9760"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9760"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}