A regular investor has four investment vehicles.

Bonds. I don’t recommend bonds because on the long run they always under-perform stocks.

Single stocks. I don’t recommend single stocks because you have two risks; the stock risk ( lower profits, corporate scandals, etc. ) and the market risk (this risk cannot be avoided).

Mutual funds. I strongly discourage actively managed funds and equally promote index funds.

Exchange Traded Funds (ETFs) are extremely similar to index funds, except on the way you buy then and sell them.

If you were my sister or my good friend, which one would I recommend to you.

What I recommend

Both, ETF and Index funds are in all practical sense the same investment. Let’s say that I am interested in the Toronto-60 (which is an index of the 60 biggest Canadian companies).

Both the ETF and the index will have exactly the same 60 companies.

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