Stock Vs ETF – Which one is better?


See, what is the difference between stocks and ETFs, these are exchange-traded funds? And which one should you trade? Which one has a larger profit potential? And that’s what we’re going to talk about right now. See, if you want to succeed with trading, there’s three things that you will need to master. The first is what to trade. And there’s a lot of things that you can trade: stocks, options, ETFs, Forex, cryptocurrencies, futures, right? The second thing that you need to master is when to enter. And the third thing is when to exit. And there’s two ways to exit either with a profit or with a loss. As we talk right now about stocks versus ETFs, we cover the first part, what should you trade. When trading stocks there’s pros and cons to trading stocks, right? One of the things that happens with stocks that regularly, there is news that is moving the stock. News can make a stock violently move to the upside or the downside. This is why there are some ETFs. ETF stand for exchange traded funds and it basically means, it is a fund of stocks that is traded like a stock. And these days there are many ETFs and each ETF has a purpose. The idea here is when investing in an ETF that you are diversifying. Let me give you an example. Let’s say, that you want to invest in the S&P 500 and instead of buying 500 stocks, right? You you just buy an ETF that is called S P Y. So, let me show you exactly what this looks like. So, I’m going to show you here a chart of the SPY and this is an ETF that is mirroring what the S&P 500 does. It is just way cheaper to trade. Right now, as we’re recording this at the end of April it is trading at around 300 dollars just shy of 300 dollars. So, if you would like to benefit when the whole S&P is going up you can trade the ETF that is called a SPY. The cool thing is, it trades like a stock, and therefore it’s really easy to get in and out, and also fairly cheap, compared to mutual funds that have tremendous management fees. An ETF usually has much much less management fees and therefore could be an alternative to mutual funds. One of the things with ETFs is they don’t have earnings and they do not provide any dividends. Also, the cons of ETFs the disadvantages is that it moves much slower. So, as an example today the spider which is the ETF that is mirroring the S&P 500 moved up point one 3 percent. Now, compare this to some individual stocks that I like to trade, for example, OLN that today moved to one-point three percent ten times as much. Or what is another stock VSTO that we were trading today? Moving one-point seven one percent. 15 times as much as the index. So, this is why I personally prefer to trade stocks over options. And if you would like to know how I pick the stocks that I personally use in my trading, please go to a website that I set up for you it’s called mytradingroutine.com that explains exactly how I find the best stocks to trade. But let’s talk about a few key ETFs that you might want to know because you might choose to invest in ETFs. And so, one of them, we already talked about it, is the SPY the, so-called, spider. And it is mirroring what the S&P 500 does. If you want to invest in an ETF that is mirroring what the Dow Jones does there is the so-called diamonds. The symbol is DIA. And you see right now it is trading at around two hundred and sixty-five. The whole Dow Jones if you would buy all the stocks in the Dow Jones would be at 26000, right? But here, obviously, this is much cheaper. So, it behaves exactly as the Dow Jones if you like to trade the Nasdaq. There is an ETF for that, that is mirroring the Nasdaq which is called the QQQ. No idea why they’re calling it, but, hey, you just need to know it’s called the Qs and the symbol is QQQ. Also, if you would like to trade crude oil but you don’t like to trade the futures market you can trade an ETF which is called USO which is tracking what crude oil is doing. So, if you are betting that crude oil will rise you can just buy an ETF that is called USO. And if you believe that crude oil will go down that prices will decrease, then you can simply sell this stock or this ETF that’s traded like a stock and it’s called USO. Now, one more that I want to show you it’s FXE. FXE is mirroring the euro currency. So, if you are interested in currency trading and you don’t want to trade Forex you can do it with an ETF. Now, there is many ETFs out there and whatever you want to trade, whether you want to participate in gold or silver you can do this with an ETF and it is as easily traded as a stock. Now, one more thing that I want to cover here is so-called leveraged ETFs. And what does this mean? We talked about the SPX that is mirroring the S&P. So, as an example today the S&P was up point one one percent. Now, you can trade an ETF that is leveraged with a factor too, the symbol for this is then SSO and, as you can see, today it went up zero point to five percent exactly twice as much. So, you’re getting some leverage here and for every point that the S&P goes up these this particular leveraged one called SSO goes up 2 points or there’s even one that’s leveraged with a factor of three and it’s called UPRO. The ultra pro shares. And you see the SPX today was only going up point one percent and the UPRO was going up point three five percent. So, as you can see they are leveraged ETFs and leverage is a double-edged sword. It works in your favor, as well as against it. So, if the S&P goes down by a point this particular fund here UPRO would go down three times as fast. Very last thing that I want to mention here, you can also bet on a falling market if it is screwing with your head that you say, “Well, I would have to go short,” they got you covered. So, for example, there is an ETF that is mirroring the S&P right now, as you can see, the S&P today went up point one one and this went down point one one. So, it is basically betting on a falling market as the S&P goes down this ETF will go up. So, as you can see, you can make it as easy or as complicated as you want it to be. I personally do not trade any of the ETFs and here’s why. For me, the main disadvantage is that these ETFs are rather slow. Even if you have here a leveraged ETF as you have seen today the stocks that I’m trading has been moving one point three and one point seven percent in a day. The ETFs, even the leveraged ones, only move zero point three three percent. So, therefore, I personally like to trade stocks. But it’s important that you know the difference between a stock and an ETF and I hope that now you know this so that you can make an informed decision of what you want to trade. Keep in mind that stocks have earnings and dividends. ETFs typically do not have any earnings and do not have any dividends ETF are more diversified. And whenever something is diversified it means that it moves much slower. Is this helpful? As always make sure to subscribe to YouTube and hit like. As many likes as possible. And I hope that you enjoyed watching this show as much as I enjoyed making it for you. And if you know anybody, who might find this video helpful, please feel free to share it.

9 thoughts on “Stock Vs ETF – Which one is better?

  1. Do you still use range bar for your chats and signals. As I remember that's what you had been using in the past?

  2. Markus you are extremely helpful and positively impacting and giving back to others, thank you. One clarification I would like to make is that there are ETF's that do in fact pay dividends, there are also different REIT's that sort of function like an ETF except they buy different real estate as asset classes instead of stocks which also pay dividends. Have a great weekend Markus. πŸ™‚

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