Stop Investing in Individual Stocks, Use ETFs or Mutual Funds Instead

Investing money so that it grows in the future is a good idea. Selecting individual stocks for this is not. If you still have the habit of investing in the future by choosing stocks, there is a better way.

As personal finance writer Bob Lotich of SeedTime explains , individual stocks can rise and fall with the wind. Even most professionals cannot predict them well enough to outperform the market. If you’re not even sure what it means to “beat the market”, let alone how to do it, you’d better stick with ETFs or mutual funds :

Investing in individual stocks can be fun and rewarding, but also frustrating. You must research, buy, track and sell every stock in your portfolio. If you have dozens of them, it could be the equivalent of a part-time job.

You can avoid all this hassle by investing in mutual funds or exchange-traded funds. Index funds are especially attractive as very few actively managed funds ever outperform the market .

This is not new advice, but it’s worth repeating until everyone gets it. Learning how individual stocks work is a great educational experience. If you would like to know how the stock market works, we have a guide to help you get started . After all, if you’re not ready to devote your career to pursuit, you probably won’t be able to surpass the returns that you can generate with a simple ETF or mutual fund by choosing individual stocks. You can also save yourself the hassle.

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