Stocks vs. ETFs

Stocks vs ETFs

When you purchase a stock, you are purchasing ownership in a business. Typically, you are purchasing a stock because you believe the company will have better prospects in the future. As an owner in the company, you can participate in the growth that well performing businesses experience over time. You have the freedom to choose which stocks and how many shares you buy of that business. The more shares you buy the more ownership you have. The risk with stocks is that you can lose the entire value of your investment if the company fails and cannot pay it’s obligations. You can purchase stocks and ETFs through a self-directed investment account or a licensed broker.

Exchange Traded Funds are a group of different securities such as stocks, bonds and commodities that are bundled together in one investment. Like stocks they can be purchased through a self-directed account or a broker and trade on an exchange like the Toronto Stock Exchange or New York Stock Exchange. To purchase stocks and ETFs generally there will be commissions involved depending on the method of purchase. There are some differences between the two securities. ETFs are constructed by asset managers and therefore do charge a management fee. Management fees can start as low as 0.02% but ultimately depend on the type of ETF. Additionally because ETFs contain a group of investments, diversification is achieved more easily than building the same portfolio of stocks.