See, what is the difference between
stocks and ETFs,
these are exchange-traded funds?
And which one should you trade?
Which one has a larger profit
potential? And that's what
we're going to talk about right
now.
See, if you want to succeed with
trading, there's three
things that you will need to
master. The first is what
to trade.
And there's a lot of things that you
can trade: stocks, options,
ETFs, Forex, cryptocurrencies,
futures, right?
The second thing that you need to
master is when to enter.
And the third thing is
when to exit.
And there's two ways to exit either
with a profit or with
a loss. As we talk right now about
stocks versus ETFs, we cover
the first part, what
should you trade.
When trading stocks there's
pros and cons to trading stocks,
right? One of the things that
happens with stocks that regularly,
there is news that is moving
the stock.
News can make a stock violently
move to the upside or
the downside.
This is why there are some
ETFs. ETF stand for exchange
traded funds and it basically
means, it is a fund
of stocks that is traded
like a stock.
And these days there are many ETFs
and each ETF has
a purpose. The idea here is
when investing in an ETF
that you are diversifying.
Let me give you an example.
Let's say, that you want to invest
in the S&P 500
and instead of buying 500
stocks, right?
You you just buy an ETF
that is called S P Y.
So, let me show you exactly what
this looks like.
So, I'm going to show you
here a chart of the SPY
and this is an ETF that is mirroring
what the S&P 500
does.
It is just way cheaper to trade.
Right now, as we're recording this
at the end of April it is trading
at around 300 dollars just
shy of 300 dollars.
So, if you would like to benefit
when the whole S&P is going
up you can trade the
ETF that is called a SPY.
The cool thing is, it trades like
a stock, and therefore it's really
easy to get in and out,
and also fairly cheap, compared
to mutual funds that have tremendous
management fees.
An ETF usually has much
much less management
fees and therefore could
be an alternative to mutual funds.
One of the things with ETFs is they
don't have earnings and
they do not provide any
dividends.
Also, the cons of ETFs
the disadvantages is
that it moves much slower.
So, as an example today
the spider which is the
ETF that is mirroring the S&P 500
moved up point one
3 percent.
Now, compare this to some individual
stocks that I like to trade,
for example, OLN
that today moved to one-point
three percent ten times
as much.
Or what is another stock VSTO
that we were trading today?
Moving one-point seven
one percent.
15 times as much
as the index.
So, this is why I personally
prefer to trade stocks
over options.
And if you would like to know how I
pick the stocks that I personally
use in my trading, please go to a
website that I set up for you it's
called mytradingroutine.com that
explains exactly how
I find the best stocks to trade.
But let's talk about a few key
ETFs that you
might want to know because you
might choose to invest in ETFs.
And so, one of them, we already
talked about it, is the SPY the,
so-called, spider.
And it is mirroring what the S&P
500 does.
If you want to invest in an ETF that
is mirroring what the Dow Jones does
there is the so-called diamonds.
The symbol is DIA.
And you see right now it is trading
at around two hundred and
sixty-five.
The whole Dow Jones if you would buy
all the stocks in the Dow Jones
would be at 26000,
right? But here, obviously, this
is much cheaper.
So, it behaves exactly
as the Dow Jones
if you like to trade the Nasdaq.
There is an ETF for that, that is
mirroring the Nasdaq which is called
the QQQ.
No idea why they're calling it, but,
hey, you just need to know it's
called the Qs and
the symbol is QQQ.
Also, if you would like to trade
crude oil but you don't like
to trade the futures market
you can trade an ETF which
is called USO
which is tracking what crude
oil is doing. So, if you are betting
that crude oil will rise
you can just buy an ETF
that is called USO. And if you
believe that crude oil will go
down that prices will decrease,
then you can simply sell
this stock or this
ETF that's traded like a stock and
it's called USO.
Now, one more that I want to show
you it's FXE. FXE
is mirroring the euro currency.
So, if you are interested in
currency trading and you don't want
to trade Forex you can do it
with an ETF.
Now, there is many ETFs out there
and whatever you want to trade,
whether you want to participate in
gold or silver you can
do this with an ETF and
it is as easily traded
as a stock.
Now, one more thing that I want to
cover here is so-called leveraged
ETFs. And what does this mean?
We talked about the SPX that is
mirroring the S&P.
So, as an example today the S&P
was up point one one percent.
Now, you can trade
an ETF that is leveraged with
a factor too, the symbol
for this is then SSO
and, as you can see, today it went
up zero point to five
percent exactly twice as
much. So, you're getting some
leverage here and
for every point
that the S&P goes up these
this particular leveraged one called
SSO goes up
2 points or there's
even one that's leveraged
with a factor of three and it's
called UPRO.
The ultra pro shares.
And you see the SPX today
was only going up point one percent
and the UPRO
was going up point three
five percent.
So, as you can see they are
leveraged ETFs and leverage is
a double-edged sword.
It works in your favor, as well as
against it. So, if the S&P
goes down by a point
this particular fund here
UPRO would
go down three times as fast.
Very last thing that I want to
mention here, you can also bet
on a falling market if it is
screwing with your head that you
say, "Well, I would have to go
short," they got you covered.
So, for example, there is an ETF
that is mirroring the S&P
right now, as you can see, the S&P
today went up point one
one and this went down
point one one.
So, it is basically betting
on a falling market as the S&P
goes down this
ETF will go up.
So, as you can see, you can make it
as easy or as complicated as
you want it to be.
I personally do not
trade any of the ETFs
and here's why.
For me, the main disadvantage
is that these ETFs
are rather slow.
Even if you have here a leveraged
ETF as you have seen today the
stocks that I'm trading has been
moving one point three and
one point seven percent in a day.
The ETFs, even the leveraged
ones, only move zero
point three three percent.
So, therefore, I personally
like to trade stocks.
But it's important that you know the
difference between a stock and an
ETF and I hope that now you
know this so that you
can make an informed decision of
what you want to trade.
Keep in mind that stocks have
earnings and dividends.
ETFs typically do not
have any earnings and do not
have any dividends ETF
are more diversified.
And whenever something is
diversified it means that
it moves much slower.
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