Exchange-traded funds, or ETFs, offer a distinct approach compared to selecting individual shares. The biggest advantage of ETFs is diversification. A single ETF can hold dozens or even hundreds of companies, which helps mitigate the impact of a single poor performer. This makes ETFs especially attractive for beginners or investors who want steady exposure to a market, sector, or theme without constant monitoring.

Another key difference is risk and effort. Picking individual shares requires deep research, regular reviews, and strong emotional discipline. Even high-quality companies can underperform due to timing, market cycles, or unexpected events. ETFs lower this risk by spreading exposure, but in return, they usually deliver average market returns rather than exceptional outperformance.

Costs also matter. ETFs generally have low management fees and minimal trading costs, while frequent buying and selling of individual shares can increase commissions and taxes. Liquidity is usually strong for popular ETFs, making them easy to enter or exit.

On the other hand, selecting individual shares allows for higher upside if the analysis is correct. Investors can focus on businesses they understand well and benefit more from strong growth stories. However, this approach demands patience, experience, and the ability to manage losses.

In practice, many investors combine both strategies. ETFs form a stable core portfolio, while individual shares are used selectively to seek higher returns with controlled risk.

ETFs offer a different approach to investing compared to picking individual shares. An ETF bundles many stocks into a single instrument, giving instant diversification and reducing the impact of any one company performing poorly. This makes ETFs attractive for investors who want steady exposure to a market, sector, or theme with less time spent on research. Picking individual shares, on the other hand, allows for more control and the potential for higher returns if the chosen companies perform exceptionally well. However, this approach requires deeper analysis, ongoing monitoring, and a higher tolerance for risk. ETFs generally have lower volatility and predictable behaviour, while individual stocks can be more volatile but rewarding. The choice depends on an investor’s goals, experience, time commitment, and risk appetite.