The decision of whether to dive into the stock-picking arena, choosing a variety of companies and investing one’s life savings into such firms, or choosing a path of passive investing via utilizing an exchange traded fund (ETF) or another passive vehicle, is a daunting one.
The concept of investing one’s hard-earned money in companies for a duration of time necessarily means that the person doing the stock picking should know enough about a given company or industry to make such a call; thus, the cost of the time and research which is required to make informed decisions is perhaps the most significant cost and burden to an investor looking to make a decent return over time in a very uncertain and complex investing environment.
Passive investments such as ETFs, on the other hand, provide investors who wish to invest little in the way of time or sweat equity, but have cash on hand, a decent way of tracking the return of an index, sector, or group of companies one believes is likely to perform well over time.
Depending on the time horizon, risk appetite, and income needs of a given investor, both investment strategies have pros and cons which should be considered. Talking with an investment advisor about the options available is a good start, for those concerned about future performance in a stock market which has been red hot for nearly a decade now.
Invest wisely, my friends.
