FinancialEdge: 7 Reasons To Pick ETFs Over Stocks

Apparently nothing can ever be simple on Wall Street. Take the case of a simple question like "should I invest in ETFs?" A beginning investor can spend less than 10 minutes on Google (Nasdaq: GOOG) and learn (if that is the right word to use) that exchange traded funds (ETFs) are the greatest invention since fire, the worst thing since the Yugo, or "investing in ETFs involves risks and may or may not be appropriate for your individual situation; please consult an advisor." (For a background, see our Introduction To Exchange-Traded Funds.)

While it is true that everybody's financial situation is different, here are some advantages of ETFs relative to stocks and mutual funds for beginners to consider. 


Less Due Diligence

The iShares U.S. Medical Devices ETF (NYSE: IHI) contains 40 different stocks. It would take weeks for an individual investor to do proper due diligence on each of those names, and that is one of the advantages of ETF investing. Because the impact and importance of any one stock is relatively small, investors can spend their time thinking about which sectors and markets are poised to perform and make investment choices without being bogged down by an overwhelming amount of initial and ongoing due diligence. 



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