Best ETFs To Buy In 2021

Video length 00:36:03

Exchange-Traded Funds or ETFs are becoming more popular among those who want to break away from traditional mutual funds but aren’t quite ready for handpicking individual stocks for their portfolio. 

ETFs are low cost, tax-efficient, liquid, provide diversification, and are in general just better-suited to a lot of people.

Today, we’ll be having a conversation with Kyle Woodley, senior investing editor at Kiplinger.com, on the best ETFs he recommends for 2021. 

We’ll be going through all the topics regarding ETF investing, how they are different than mutual funds, who should invest in them, and how to select the best ETFs out there.

So first of all, let’s begin by understanding what an ETF is? And how is it different from mutual funds and individual stocks?

Difference Between ETFs and Stocks

ETFs, just like mutual funds, are a basket of securities that lets you invest in a variety of assets. The only difference being that ETFs trade on stock exchanges like individual stocks, and you can buy and sell them with the help of your broker.

The major difference between investing in stocks and an ETF is the risk and reward they offer. A single stock is likely to have much more upside and downside potential than any sort of fund, whether a mutual fund or an ETF.

In the case of an individual stock, your portfolio performance completely depends on the movements of that stock. However, in the case of funds, a fund would probably invest in 30, 50, 100, or even more companies that significantly reduce the risk as well as the return potential.

Now, it goes without saying that there are exceptions to the aforementioned statement. For example, Coca-Cola probably will not move as much as a clean energy ETF. But in most cases, a fund will not be as concentrated as a handpicked portfolio. 

The advantage of not having a high concentration is that you get diversification that protects you from higher risk. The flip side, though, is if you’re trying to generate outflow and outperform the market, then it’ll be much easier with an individual stock that can, you know, go to the moon.

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Disclaimer: Investing in the financial markets involves a risk of loss. You should only invest the money you can afford to lose.

Invest Diva (KPHR Capital, LLC) and Kiana Danial are NOT a ...

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