WHY USE INDEX FUNDS AND ETFs INSTEAD OF INDIVIDUAL SECURITIES?
Funds generate fewer trades with more diversity, and therefore less risk. Individual equity prices can be far more volatile than stock or bond indices and that makes individual securities far less predictable. Because the Smarter Than Wall Street model invests in only one asset at a time, an index fund provides some of the diversification needed to reduce risk. Individual securities are included in most of the other models I use in private practice, but in reality, if an investor has less than $250,000 it is thoroughly difficult to get adequate diversity using individual securities.
Related Questions
- Does Foundation Financial, Inc. (FFI) offer a reasonable alternative to mutual funds, index funds and ETFs for Christians to achieve both their values and their performance objectives?
- Why did students first invest in index funds, and then progress to choosing individual stocks?
- What is the difference between ETFs and open-ended index funds?
