Hello my friends. Exchange Traded Funds are quite an interesting product which became very popular during last decade. The question many beginners ask is whether ETF can be traded like a single stock or not. Although both are traded o a securities exchange they are not the same.

ETFs vs Stocks

The article will be separated into two parts:

1. What is similar between ETFs and a single stock?
2. What is different between ETFs and a single stock?

Before I start it is important to say that I will compare ETFs which are compounded from stocks not commodity futures or real estate securities.

What is similar between ETFs and a single stock?

As previously said both securities are traded on the same exchanges (for example, NYSE or NASDAQ). Both financial instruments can be bough and sold short during trading hours. In both cases you get dividends if they are paid by companies. And finally both ETFs and single stocks are exposed to market risk.
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What is different between ETFs and a single stock?

However, ETFs are structured in a bit different way. Firstly, it is a fund and management fees exist. Secondly, ETFs consist of various stocks (or other instruments), therefore buying one ETF you make in investment into several (maybe hundreds) company shares. You can follow an index, at the same time having comparably small amount of money in the account and with low commission fees.

Finally you must decide what are you looking for – a diversified, low risk investment into various company shares or you are looking for 1-2 exact stocks.
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Know what you invest in.

Regards,

Nikita