Are ETFs Better than Stocks for Beginner Investors
                     A R E  E T F S  B E T T E R  
T H A N  S T O C K S  F O R  
B E G I N N E R  
I N V E S T O R S ?
BY  L E V E L  F I N A N C I N G

Making your first moves as a beginner investor can be a 
bit scary. We are exposed to all these new asset names, 
and we don’t have a clue of what would happen if we 
bought them. Our main fear is that by doing so, we will 
end up losing our hard-earned savings.
However, you don’t need a finance degree or a stock 
broker license to start investing. A lot of people with little 
knowledge in this field do it every day and have found a 
way to slowly grow their wealth without having to spend 
the entire day looking at charts and following financial 
news.
ETF is an abbreviation for exchange traded fund (ETF), a 
type of pooled investment security. To be more specific, 
an ETF is a collection of assets (e.g., stocks, bonds, or 
commodities). It is traded on an exchange, and investors 
can buy or sell it at any time at its current market price.
Through ETFs, investors can access a wide range of 
financial assets by investing in one single fund. For this 
reason, ETFs are an attractive investment for those who 
want to achieve portfolio diversification without the need 
to buy stocks and bonds individually.
When buying an ETF, the investor owns shares of the 
underlying assets that compose the fund. For example, if 
you decide to invest in the S&P 500 index, you will own a 
fraction of all the 500 stocks that compose this index, 
and your returns will be determined by the movement of 
those stocks.
While investing in a fund that pools different assets 
together may increase diversification and lower risks 
compared to investing in an individual stock, it’s 
important to understand that ETFs are still subject to 
market volatility and that losses can be experienced.
They are particularly good options for those who want to 
invest in the long term and gradually increase their wealth 
without putting a daily effort into following the stock 
markets and making frequent investment decisions.
ETFs are also more versatile than individual stocks. For 
example, if you’d like to invest in a specific industry or 
sector without having to buy each company’s stocks 
individually, you can easily find an ETF that tracks the 
performance of that sector and invest in it.
Let’s have a look at the major advantages of investing in 
ETFs compared to buying stocks.
• Access to a diversified portfolio of investments in one 
single fund.
• Risk is spread over multiple assets.
• Investors can access a wide range of asset classes.
• When held for long periods, they tend to be a very tax-
efficient option as they generate fewer capital gain 
taxes.
However, ETFs also come with some drawbacks when 
compared to stocks.
• They may not track the underlying index as 
effectively as mutual funds.
• Liquidity can be an issue as some ETFs have low 
trading volumes.
• These funds are not always managed with total 
transparency.
First, consider your investment goals and objectives. 
What do you hope to achieve with your investments? Are 
you looking for long-term growth or short-term gains? 
Knowing what you want to accomplish will help you 
narrow down the list of potential ETFs.
Next, research the ETFs that meet your criteria. Look at 
their performance over time and compare them to other 
similar funds. Consider the fees associated with each 
fund and how they may affect your returns. Also, pay 
attention to any risks associated with the fund and make 
sure it aligns with your risk tolerance level.
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