Stocks Vs ETFs

Stock trading is a proven and time tested method of wealth building that has been used by many people over the last few centuries to make fortunes. You can invest in stocks for a long haul like 2-5 years with your buy and hold style of investment. You can day trade stocks too. So what is the best method of investing in stocks?

There are thousands and thousands of stocks listed on the different stock exchanges in the world. Out of these thousands and thousands of stocks, only a few have the potential of making you rich in 2010. In US alone, more than 50,000 stocks are listed in the different stock exchanges like NYSE, NASDAQ, AMEX etc. Start the year 2010 with identifying ten best performing stocks in your opinion.Identification of these ten best performing stocks mean that you need to study these stocks in detail.

Focus on its price action and how well it matches with the S&P 500 Index. Before you invest in any stock, observe it for at least one week and do not put any money into it unless you probe it thoroughly and feel comfortable with it.

You must have heard about the Exchange Traded Funds (ETFs). ETFs were developed some two decades back. Within these short 20 years, ETFs have become highly popular with the investing public. Let’s see why ETF investing can be much superiors as compared to investing in individual stocks or mutual funds. ETFs trade just like stocks. You can buy them or sell them anytime of the trading day. You can even short them unlike the stocks that require the uptick rule. Not every stock can be shorted. But ETFs can be! However, ETFs give you the diversification benefits of a mutual fund with lower fees something like 0.7% as compared to 1-2% of the mutual funds. This makes an ETF investment much superiour to a stock or a mutual fund.

Now with mutual funds, you can only sell it share after the close of the trading day when it’s NAV (Net Asset Value) is calculated. But with ETFs, you can buy or sell it’s shares anytime of the day just like a stock. Most of the ETFs have been developed in such a manner so as to mimic some stock index, sector index, industry index or any other composite index. This makes these ETFs almost similar to those indexes.

Since an ETF is mimicking a specific index, it is much more broadly diversified as compared to an individual stock. So ETFs are not much affected by breaking news or other economic news as compared to individual stocks.

So what are the best stocks to invest in 2010? Should it be a micro cap, a mid cap or a large cap or a growth stock or a value stock. Investing in micro cap stocks comes with a dream. The dream of picking a micro cap stock that will sky rocket into a mid cap and eventually into a large cap give you a huge ROI. The rewards can be astronomical and your percentage gains larger than you expected. Though the chances of you picking the right micro cap stock is pretty slim!

However by investing in Micro Cap ETFs, you can reap the rewards with only a few micro cap stocks soar and take the micro cap index up with them. You can reducing your risk and increasing diversification but losing some of the upside potential with investing in Micro Cap ETFs!There are many different ETFs. in 2010, invest in ETFs and reap the rewards!

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