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ETF vs. Stock

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Modern investing offers lots of options, providing a ready-made solution to nearly every investment quandary. It’s almost enough to make you nostalgic for the days when you just invested in a stock. Almost.

That option still exists and ETFs provide a way to build a position in a sector while still buying individual stocks. 

What is a Stock?

Companies are owned by someone; either by one person, family, by another company, many people, or organizations. In all cases, the company ownership is divided into shares, pieces of the company known as stock. When you own stock, you own shares, a claim on the company’s earnings and assets, but not the corporation itself.

This structure is good for investors (and companies) because it keeps investors legally separate from the company, preventing either party from liquidating the other party’s assets to remain solvent or for any other reason. With a publicly-held company, shares are traded on exchanges, allowing investors to easily enter or exit positions or to build a long-term position with a single stock or a portfolio of stocks.

Check out the SEC’s guide on stock trading basics if you’d like to know more.  Stocks are shares issued to raise capital to fund business operations, money in exchange for a claim on future earnings. They can also serve as an exit strategy for early investors in publicly-traded companies, company founders, management, and others in the company who have stock or stock options. Selling these shares in the market is a way to recoup an investment and lock in returns.

What is an ETF?

An exchange-traded fund (ETF) is an investment fund that trades on a stock exchange along with stocks for individual companies. ETFs are flexible investment vehicles which purchase various types of assets to meet their investment goals.

They can track an index like the S&P 500, track a sector, represent a commodity (like gold, oil, or wheat) or sample a basket of stocks or bonds that meet a given criteria. ETFs exist for nearly any investment strategy you can imagine, and if someone imagines something new that can have value, an ETF is sure to follow. The SEC’s guide on trading ETFs and mutual funds is especially useful if you’d like to know more. 

ETFs are often similar to index funds, focused mutual funds that track an index.

But, have some key differences from index funds, primarily the way in which they trade, their fees and the way dividends are distributed. ETFs that hold dividend-producing securities distribute their dividends on a quarterly basis. ETFs hold the underlying assets, usually stocks, and investors buy shares of the fund, much like mutual funds — but ETFs are easier to trade because they can be traded through an online broker and don’t require a full-service broker or buying directly from the mutual fund company.

Current Stock Movers

Check the chart below to see today’s biggest gainers and losers in the market. Bookmark this page and come back tomorrow to see what’s new.

Gainers

Session: Oct 29, 2020 4:00 pm – Oct 30, 2020 3:59 pm
Symbol Open Close Change Change % Volume
MARPS
Marine Petroleum Trust
2.46 3.40 0.94 38.21% 25.66M
BLRX
BioLine Rx
1.48 2.00 0.52 34.79% 211.70M
TCDA
Tricida
4.37 5.62 1.25 28.60% 10.27M
AIRI
Air Industries Group Common Stock
1.02 1.31 0.29 28.44% 17.01M
DSKE
Daseke
5.19 6.55 1.36 26.17% 3.11M
BBW
Build-A-Bear Workshop
3.32 4.17 0.85 25.63% 69.93K
ACHC
Acadia Healthcare Co
28.98 35.59 6.61 22.80% 2.00M
MICT
MICT
2.56 3.13 0.57 22.26% 1.64M
CASI
CASI Pharmaceuticals
1.93 2.35 0.42 21.76% 1.54M
LNSR
LENSAR
8.16 9.81 1.65 20.22% 11.62K
CVA
Covanta Holding
7.62 9.03 1.42 18.58% 4.96M
OIIM
O2Micro Intl
5.43 6.43 1.00 18.41% 98.49K
ROG
Rogers
102.79 121.00 18.21 17.71% 22.10K
NVUS
Novus Therapeutics
21.42 25.02 3.60 16.80% 19.84K
MDLX
Medley LLC 6.875% Senior Notes due 2026
5.26 6.13 0.87 16.44% 18.66K
DZSI
DZS
9.73 11.29 1.56 16.03% 36.36K
FNGD
MicroSectors FANG Index -3X Inverse Leveraged ETNs due January 8, 2038
7.60 8.80 1.20 15.72% 5.33M
MGI
MoneyGram
4.49 5.17 0.68 15.14% 40.88M
SDPI
Superior Drilling Products, Inc. Common Stock
0.43 0.49 0.06 15.05% 5.21M
WEBS
Direxion Daily Dow Jones Internet Bear 3X Shares
38.92 44.60 5.68 14.59% 17.21K

Losers

Session: Oct 29, 2020 4:00 pm – Oct 30, 2020 3:59 pm
Symbol Open Close Change Change % Volume
SNBP
Sun BioPharma
9.50 2.92 -6.58 -69.27% 3.51K
DUOT
Duos Technologies Group
7.00 3.46 -3.54 -50.53% 5.33K
AXGT
Axovant Gene Therapies
3.65 2.12 -1.53 -41.80% 7.30M
BLCM
Bellicum Pharmaceuticals
5.90 3.69 -2.21 -37.46% 1.08M
PBI
Pitney Bowes
7.42 5.31 -2.11 -28.44% 10.24M
NTEC
Intec Pharma
3.08 2.28 -0.80 -25.88% 1.81M
NUZE
Nuzee
16.90 12.90 -4.00 -23.67% 36.58K
COLM
Columbia Sportswear
96.27 74.77 -21.50 -22.34% 1.56M
MVIS
Microvision
2.21 1.73 -0.48 -21.72% 8.15M
TWTR
Twitter
52.45 41.25 -11.20 -21.36% 82.90M
POLA
Polar Power
3.70 2.91 -0.79 -21.35% 6.07M
LOCO
El Pollo Loco Holdings
17.60 14.11 -3.49 -19.83% 1.37M
HEPA
Hepion Pharmaceuticals
3.34 2.70 -0.64 -19.23% 37.82K
HPR
HighPoint Resources
6.73 5.44 -1.29 -19.11% 18.99K
JFU
9F
1.63 1.32 -0.31 -19.02% 3.58M
JT
Jianpu Technology
4.51 3.69 -0.82 -18.22% 19.25K
GTEC
Greenland Technologies
2.18 1.79 -0.39 -18.03% 11.60K
RIVr
RiverNorth Opportunities Fund, Inc. Rights (expiring November 6, 2020)
0.01 0.01 0.00 -17.75% 1.60K
RAVE
Rave Restaurant Gr
0.87 0.72 -0.15 -17.25% 3.14M
GT
Goodyear Tire & Rubber
9.93 8.25 -1.68 -16.92% 9.83M

Similarities Between Stocks and ETFs

Take a look at some of the attributes that make stocks and ETFs similar.

1. Stocks and ETFs trade on major exchanges

When we think of investing, we often think of stocks or mutual funds. ETFs provide some of the benefits of mutual funds, including diversification, but are traded on a stock exchange like the NYSE or NASDAQ alongside stocks.

This makes ETFs widely available and provides a way for traders or investors to exit positions quickly, much like with stocks. Also like stocks, thinly-traded shares may require some planning and patience if you want to buy or sell because there can be a large spread between bid and ask prices. This isn’t an issue with actively traded stocks and ETFs shares.

2. Stocks and ETFs settle at the same price

Both stocks and ETFs settle at the price at the time of the purchase or sale. Experienced investors know the price of an equity can change by the second, the minute, or the hour — especially if there is news moving the price. Owners of mutual fund shares are along for the ride, whether up or down, because the price of the trade settles at the end of the trading day after the fund rebalances. Stock and ETF trades settle at the executed trade price, which may be higher or lower than the end of day price, but which won’t be a surprise.

Differences Between Stocks and ETFs

The differences between stocks and ETFs go beyond the obvious, which is that ETFs are made up of more than one holding. The differences that affect your portfolio performance revolve around diversification and focus of the investment.

1. The number of shares changes

Stocks have a fixed number of shares. Stock buybacks, stock splits, and secondary offerings all change the number of shares for a stock — but these events don’t happen all day, every day. ETFs, by comparison, create and redeem shares as needed to more closely match the share price to the Net Asset Value, or NAV, a measure of the fund’s total assets minus its liabilities relative to the number of shares outstanding.

This creation/redemption mechanism adjusts the number of shares in the ETF and helps the ETF more effectively track the performance of the index or asset class it attempts to mimic.

2. ETFs can be focused or diversified

Individual stocks are a direct bet on a company’s future earnings, or more accurately, its stock price. The two don’t move in tandem. ETFs, however, can be either focused, holding only a few securities or assets, or diversified, representing a large index, like the S&P 500, which features companies in every major sector. More focused ETFs can have similar performance to individual stocks because they have such a limited core of holdings.

This can be great news or bad news — or somewhere in between — but it does provide investors with a way to trade on investment strategies that would be difficult to duplicate with a basket of individual stocks.

Online Brokers for Stocks and ETFs

Interested in investing online? Take a look at our recommended stock and ETF brokers below to get started.

Commissions
$0 $6.95 for OTC Stocks
Account Minimum
$0
Get started securely through TD Ameritrade’s website
Commissions
$0 $6.95 for OTC Stocks
Account Minimum
$0
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
Pros
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates
Commissions
$0
Account Minimum
$0
Get started securely through Webull’s website
Commissions
$0
Account Minimum
$0
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • Commission-free trading in over 5,000 different stocks and ETFs
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Leverage of 4:1 on margin trades made the same day and leverage of 2:1 on trades held overnight
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in options, mutual funds, bonds or OTC stocks
Commissions
$0 per trade
Account Minimum
$0 to open an account
Get started securely through Robinhood’s website
Commissions
$0 per trade
Account Minimum
$0 to open an account
1 Minute Review

Robinhood is the broker for traders who want a simple, easy-to-understand layout without all the bells and whistles other brokers offer. Though its trading options and account types are limited, even an absolute beginner can quickly master Robinhood’s intuitive and streamlined platform. On the other hand, more advanced traders might be frustrated by Robinhood’s lack of technical analysis tools, a feature that’s now nearly universal across other platforms.

Best For
  • Beginner traders
  • Mobile traders
Pros
  • Streamlined, easy-to-understand interface
  • Mobile app with full capabilities
  • Can buy and sell cryptocurrency
Cons
  • Almost no trading analysis tools available
  • Only taxable brokerage accounts available
  • No option to open a retirement account
  • No access to mutual funds, forex or futures trading
  • Limited customer service

400 Years of Stock Investing

Individual stock investing has been around for over 400 years, while ETFs have yet to turn 40. The upstart funds are here to stay for the foreseeable future and the number of ETFs seems to grow daily, proving their utility as a focused investment vehicle or as an index investing product. Quietly, a number of ETFs also disappear each year because they can’t attract enough investment interest.

Individual stocks can disappear as well, and often not as gracefully as an ETF. A well-diversified portfolio probably has some room for individual stock investing or investing in specialized ETFs without putting the greater portfolio at risk — and part of the fun in investing is taking a measured risk, a bet that you’re right about the future price.

Ready to invest in stocks or ETFs? Check out Benzinga’s picks for the best online stock brokers.

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