Want to jump straight to the best ETF broker? Check out Interactive Brokers.
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.
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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.
China SXT Pharmaceuticals
NeuroOne Medical Tech
American Virtual Cloud
Staffing 360 Solutions
Welsbach Technology Metals Acquisition Corp. – one right to receive 1/10th of a share of common stock
Strategic CRISPR & Gene Editing Technology ETF
Energy Co of Minas Gerais
Visionary Education Tech
Energy Co of Minas Gerais
MicroSectors Gold Miners -3X Inverse Leveraged ETNs
Mercurity Fintech Holding
China Liberal Education
China Index Holdings
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.
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.
- Novice investors
- Retirement savers
- Day traders
- World-class trading platforms
- Detailed research reports and Education Center
- Assets ranging from stocks and ETFs to derivatives like futures and options
- Thinkorswim can be overwhelming to inexperienced traders
- Derivatives trading more costly than some competitors
- Expensive margin rates
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.
- Active traders
- Intermediate traders
- Advanced traders
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Intuitive trading platform with technical and fundamental analysis tools
- Does not support trading in mutual funds, bonds or OTC stocks
Robinhood is a broker designed for traders who want a simple and easy-to-use platform. It takes out all the bells and whistles that can be confusing to the modern day trader, serving as the perfect place for beginners to learn the markets. The interface is intuitive and easy to master, streamlined to ensure you don’t get distracted as you build a portfolio. Though advanced traders might like more thorough analysis tools, Robinhood gives you everything you need to start trading and learn the ropes.
- Beginner traders
- Mobile traders
- Streamlined, easy-to-understand interface
- Mobile app with full capabilities
- Can buy and sell cryptocurrency
- Fewer analysis tools than most
- Only taxable, non-retirement accounts are available
Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.
- Access to international markets
- Active traders
- Sophisticated investors
- Detailed mobile app that makes trading simple
- Wide range of available account types and tradeable assets
- IB SmartRouting provides significant price improvement vs. industry
- Fractional trading allows investing regardless of share price
- Industry’s lowest margin rates
- Earn more by lending your fuly-paid shares
- Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources
Public.com is an investing platform that helps people become better investors. Members can build a diverse portfolio of stocks, ETFs, and crypto within a single platform. Ownership unlocks an experience of content and education, contextual to their portfolio, created by an over million strong community of investors, creators, and analysts.
Public puts investors first and doesn’t sell trades to market makers or take money from Payment for Order Flow (PFOF).
- New investors looking to learn how to invest
- Experienced investors looking to grow even further
- Building a modern portfolio of stocks, ETFs, and crypto on one platform
- Fractional shares and crypto
- Transparency all around, from public portfolios to company beliefs
- Supportive, educational community
- No investing tools like futures, options, or margins
- Day-trading is discouraged
- Mobile app-based platform
TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.
- Advanced traders
- Options and futures traders
- Active stock traders
- Comprehensive trading platform and professional-grade tools
- Wide range of tradable securities
- Fully-operational mobile app
- Confusing pricing structure to leave new traders with a weak understanding of what they pay
- Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
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.