August 9, 2025 • 12 mins
In this episode of the Wealthwise Woman Podcast, Anna breaks down the key differences between investing in individual stocks and exchange-traded funds (ETFs). She explains the pros and cons of each option, from the diversification and simplicity of ETFs to the potential high returns and control of picking individual stocks. Listeners learn how to assess their goals, risk tolerance, and time horizon to choose the right mix for their portfolio. Anna also shares a practical “core-satellite” strategy, step-by-step guidance on getting started, and tips for avoiding common beginner mistakes. By the end, you’ll know exactly how to start investing with confidence – even if you’re a complete beginner.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to the wealth Wise Woman podcast. I'm your host, Anna,
and before we begin, here's your reminder. This podcast is
for educational and informational purposes only. It is not financial advice.
Always do your own research and speak with a licensed
professional before making any investment decisions. Today, we're tackling a
(00:21):
question I hear all the time, especially from women who
are just getting started with investing. Should I invest in
individual stocks or ETFs? Both can be powerful tools for
building wealth, but they work in very different ways, and
the choice isn't always obvious. It depends on your goals,
your risk tolerance, your available time, and even your personality.
(00:42):
In this four part episode, we'll cover what stocks are
and how they work, what ETFs are and why they've
become so popular, the pros and cons of each approach,
how to decide which is right for you, or if
you might want a mix of both. Let's start by
breaking down the basics. What is a stock. A stock
(01:04):
is a share of ownership in a single company. When
you buy one, you're essentially buying a slice of that business,
and if the company grows in profits, your share becomes
more valuable. Example, if you buy stock in Apple, you're
betting on Apple's future success. If the company sells more iPhones,
launches new products, and increases profits, your investment can grow.
(01:26):
You might also receive dividends small payments some companies give
to shareholders from their profits. Stocks are traded on exchanges
like the New York Stock Exchange or NASDAC. Prices move
constantly based on supply, demand, news, and market sentiment. The
potential upside huge gains if you pick a winner. The
(01:47):
potential downside big losses if the company underperforms or even
goes bankrupt. What is an ETF? ETF stands for exchange
traded fund. Instead of buying ownership in a single company,
you're buying a basket of investments. This basket might hold hundreds,
even thousands of different stocks, bonds, or other assets. Example,
(02:11):
the S and P five hundred ETF contains shares from
the five hundred largest publicly traded companies in the US,
So when you buy just one share of this ETF,
you own a tiny piece of every company in that index,
from tech giants like Apple and Microsoft to consumer brands
like Coca Cola and Procter and gamble. Like stocks, ETFs
(02:33):
trade on exchanges and their prices fluctuate throughout the day,
but because you're instantly diversified, the risk of losing everything
is much lower compared to holding just one stock. The
key difference. When you invest in a stock, your fortunes
rise and fall with a single company. With an ETF,
(02:53):
your performance is tied to the average performance of a
whole group of investments. Think of stocks as betting on
one horse in a race, and ETF says betting on
the entire race field. All right, now that we've got
the basics down, let's dig into the advantages and disadvantages
of each. This is where the decision making gets interesting,
(03:14):
because neither stocks nor ETFs are better in every situation.
It's about what works for you. The pros of investing
in individual stocks higher potential returns. If you choose the
right company at the right time, your gains can be
much higher than what you get from an ETF. Think
(03:36):
about early investors in Amazon, Tesla, or Apple. Their returns
far outpace the average market. Direct ownership, when you hold
shares in a company, you're a part owner. You can
vote on certain corporate decisions, and if the company issues dividends,
you'll receive them. Directly focus strategy. Stocks allow you to
(03:56):
concentrate on sectors or companies you deeply believe in. If
you understand a particular industry well, you can potentially use
that knowledge to your advantage. Flexibility in trading, You can
buy and sell individual stocks whenever you want during market hours,
adjusting your portfolio quickly based on news or personal strategy.
(04:18):
The cons of investing in individual stocks higher risk. If
the company performs poorly or goes bankrupt, you could lose
your entire investment. Even big established companies aren't immune to downturns.
More research required. Picking stock successfully means staying informed about
(04:38):
company financials, industry trends, and market conditions. It can be
time consuming and overwhelming emotional decision making. When a single
stock drops sharply, panic can lead to bad selling decisions.
You need a strong stomach for volatility. The pros of
investing in ETFs instant diversification. With one purchase, you spread
(05:01):
your money across dozens or hundreds of companies, reducing the
impact of any single one under performing. Lower risk. Diversification
helps smooth out the highs and lows, making ETFs generally
less volatile than individual stocks. Low costs. Many ETFs, especially
index based ones, have expense ratios as low as zero
(05:23):
point zero three percent per year, meaning more of your
return stay in your pocket. Easy to understand for beginners,
you don't need to analyze every company individually. Choosing a
broad ETF like the S and P five hundred can
be a simple way to start investing right away. The
cons of investing in ETFs lower potential for huge gains.
(05:47):
Because ETFs are diversified, they average out performance. If one
company skyrockets, its impact on your total return is smaller.
Less control over holdings, You can't handpick the companies in
an ETF. You get whatever the fund includes, even if
you're not excited about all of them. Some ETFs are
complex or risky. Not all ETFs are created equal. Leveraged,
(06:12):
or niche ETFs can carry higher risks and require more
understanding a gendered perspective For women who often face the
gender pay gap, longer career breaks, and longer life spans,
reducing risk and building steady long term growth can be
especially important. That's why ETFs are often recommended as a
foundation with individual stocks as a potential satellite strategy for
(06:36):
higher returns. Now that we've laid out the pros and cons.
The next question is, how do you actually decide whether
to invest in individual stocks, ETFs, or a mix of both.
The truth is the answer depends on your goals, your timeline,
your risk tolerance, and just as importantly, your lifestyle. One.
(07:00):
Define your investment goals before you choose. You need clarity
on why you're investing long term wealth building for retirement.
Broad market ETFs are often the safest and most reliable
choice for compounding over decades, supplementing income through dividends. You
could use a dividend focused ETF or hand pick strong
(07:20):
dividend paying stocks. High growth speculation individual stocks, especially in
sectors like tech or biotech, may offer the upside you're
looking for, but come with greater risk. When you know
your goal, the path becomes clearer. Two. Understand your risk tolerance.
Here's a quick self check. If your investment dropped thirty
(07:43):
percent in a year, would you A buy more because
it's on sale, B, hold steady and wait it out, CE, pan,
exel everything. If you answered C, individual stocks might not
be for you, especially high volatility one ones. ETFs generally
smooth out market swings, making them easier to hold through downturns. Three.
(08:08):
Assess your time commitment. If you enjoy research, reading company reports,
following industry news, and making strategic moves, stocks might fit
your personality. If you want to set it and forget
it approach, ETFs are perfect, buy hold and let them
grow with minimal intervention. Remember time is an investment too.
(08:31):
If you don't have hours each month to track individual companies,
lean toward ETFs. Four. Consider the hybrid approach. You don't
have to choose one over the other. Many investors use
a core satellite strategy. Core eighty ninety percent of your
portfolio in diversified ETFs for stability and growth, satellite ten
(08:53):
twenty percent in individual stocks you believe in or want
to speculate on. This way, you get the stability of
broad diversification while still leaving room for potential high return opportunities. Five.
Practical example the core satellite portfolio for a beginner. Let's
say you have five hundred dollars to start. Four hundred
(09:16):
dollars goes into an s and P five hundred ETF
broad market exposure fifty dollars goes into an international ETF
Global diversification fifty dollars goes into one company stock you're
excited about, for example, a brand you love and understand.
Over time, you add to each position, keeping your portfolio balanced.
(09:37):
This gives you the psychological benefit of both safety and excitement.
Six the emotional factor. Stocks can be thrilling but also
nerve racking. ETFs are are less exciting, but that's often
a good thing. If you know you're prone to emotional decisions,
leaning on ETFs as your foundation can help you avoid
(09:58):
panic moves that hurt law term returns. All right, Now
that you understand the differences pros, cons and decision making process,
let's talk about taking action. Because all the knowledge in
the world won't help if you never make your first investment.
Step one, choose your platform. You'll need a brokerage account
(10:21):
to invest in either stocks or ETFs. Look for one
with low or no commissions. Many platforms now offer commission
free trading fractional share options so you can invest small
amounts in high priced stocks. Easy to use interface, especially
if you're new. Examples include Fidelity, Vanguard, Charles Schwab, Trade Republic,
(10:43):
and Scalable Capital. Step two, open and fund your account.
Don't over complicate this even starting with twenty five dollars.
Fifty dollars is enough to begin. Link your bank account,
transfer the funds, and you're ready to invest. Step three
decide on your mix. Use the core satellite method. We
(11:03):
discussed core broad market ETFs like FU SPY or VTI
for US exposure, VXUS or AIFA for international exposure. Satellite
one or two individual stalks you believe in. If you're
not sure, start one hundred percent ETF and gradually introduce
(11:23):
stocks as you gain confidence. Step four set up automatic contributions.
Consistency beats timing. Automating monthly investments ensures your building wealth
steadily regardless of market ups and downs. Step five track,
but don't obsess. Check your portfolio monthly or quarterly, not daily.
(11:45):
This keeps emotions in check and allows your investments to
work without constant interference. Step six keep learning and adjusting.
Markets change, company's rise and fall, new ETF's launch. Keep
your financial education going through books, podcasts, Yes like this one.
I'd reputable financial news pro Tips for beginners. Reinvest dividends
(12:06):
automatically for compounding, Avoid chasing hot stocks or trends without research.
Review your portfolio yearly, and rebalance if one area grows
too large, always keep a separate emergency fund. Never invest
money you might need in the next three to five years.
Choosing between stocks and ETFs doesn't have to be in
(12:26):
either or or decision. ETFs provide stability, diversification, and low maintenance,
while stocks offer potential for higher returns and a more
personal connection to your investments. By combining both in a thoughtful,
intentional way, you can build a portfolio that grows with you,
(12:46):
matches your goals, and fits your lifestyle. And remember you
don't have to wait for the perfect moment. The best
day to start was yesterday. The second best day is today.
Welcome back to the wealth Wise Woman podcast. I'm your host, Anna,
and before we begin, here's your reminder. This podcast is
for educational and informational purposes only. It is not financial advice.
Always do your own research and speak with a licensed
professional before making any investment decisions. Today, we're tackling a
(00:21):
question I hear all the time, especially from women who
are just getting started with investing. Should I invest in
individual stocks or ETFs? Both can be powerful tools for
building wealth, but they work in very different ways, and
the choice isn't always obvious. It depends on your goals,
your risk tolerance, your available time, and even your personality.
(00:42):
In this four part episode, we'll cover what stocks are
and how they work, what ETFs are and why they've
become so popular, the pros and cons of each approach,
how to decide which is right for you, or if
you might want a mix of both. Let's start by
breaking down the basics. What is a stock. A stock
(01:04):
is a share of ownership in a single company. When
you buy one, you're essentially buying a slice of that business,
and if the company grows in profits, your share becomes
more valuable. Example, if you buy stock in Apple, you're
betting on Apple's future success. If the company sells more iPhones,
launches new products, and increases profits, your investment can grow.
(01:26):
You might also receive dividends small payments some companies give
to shareholders from their profits. Stocks are traded on exchanges
like the New York Stock Exchange or NASDAC. Prices move
constantly based on supply, demand, news, and market sentiment. The
potential upside huge gains if you pick a winner. The
(01:47):
potential downside big losses if the company underperforms or even
goes bankrupt. What is an ETF? ETF stands for exchange
traded fund. Instead of buying ownership in a single company,
you're buying a basket of investments. This basket might hold hundreds,
even thousands of different stocks, bonds, or other assets. Example,
(02:11):
the S and P five hundred ETF contains shares from
the five hundred largest publicly traded companies in the US,
So when you buy just one share of this ETF,
you own a tiny piece of every company in that index,
from tech giants like Apple and Microsoft to consumer brands
like Coca Cola and Procter and gamble. Like stocks, ETFs
(02:33):
trade on exchanges and their prices fluctuate throughout the day,
but because you're instantly diversified, the risk of losing everything
is much lower compared to holding just one stock. The
key difference. When you invest in a stock, your fortunes
rise and fall with a single company. With an ETF,
(02:53):
your performance is tied to the average performance of a
whole group of investments. Think of stocks as betting on
one horse in a race, and ETF says betting on
the entire race field. All right, now that we've got
the basics down, let's dig into the advantages and disadvantages
of each. This is where the decision making gets interesting,
(03:14):
because neither stocks nor ETFs are better in every situation.
It's about what works for you. The pros of investing
in individual stocks higher potential returns. If you choose the
right company at the right time, your gains can be
much higher than what you get from an ETF. Think
(03:36):
about early investors in Amazon, Tesla, or Apple. Their returns
far outpace the average market. Direct ownership, when you hold
shares in a company, you're a part owner. You can
vote on certain corporate decisions, and if the company issues dividends,
you'll receive them. Directly focus strategy. Stocks allow you to
(03:56):
concentrate on sectors or companies you deeply believe in. If
you understand a particular industry well, you can potentially use
that knowledge to your advantage. Flexibility in trading, You can
buy and sell individual stocks whenever you want during market hours,
adjusting your portfolio quickly based on news or personal strategy.
(04:18):
The cons of investing in individual stocks higher risk. If
the company performs poorly or goes bankrupt, you could lose
your entire investment. Even big established companies aren't immune to downturns.
More research required. Picking stock successfully means staying informed about
(04:38):
company financials, industry trends, and market conditions. It can be
time consuming and overwhelming emotional decision making. When a single
stock drops sharply, panic can lead to bad selling decisions.
You need a strong stomach for volatility. The pros of
investing in ETFs instant diversification. With one purchase, you spread
(05:01):
your money across dozens or hundreds of companies, reducing the
impact of any single one under performing. Lower risk. Diversification
helps smooth out the highs and lows, making ETFs generally
less volatile than individual stocks. Low costs. Many ETFs, especially
index based ones, have expense ratios as low as zero
(05:23):
point zero three percent per year, meaning more of your
return stay in your pocket. Easy to understand for beginners,
you don't need to analyze every company individually. Choosing a
broad ETF like the S and P five hundred can
be a simple way to start investing right away. The
cons of investing in ETFs lower potential for huge gains.
(05:47):
Because ETFs are diversified, they average out performance. If one
company skyrockets, its impact on your total return is smaller.
Less control over holdings, You can't handpick the companies in
an ETF. You get whatever the fund includes, even if
you're not excited about all of them. Some ETFs are
complex or risky. Not all ETFs are created equal. Leveraged,
(06:12):
or niche ETFs can carry higher risks and require more
understanding a gendered perspective For women who often face the
gender pay gap, longer career breaks, and longer life spans,
reducing risk and building steady long term growth can be
especially important. That's why ETFs are often recommended as a
foundation with individual stocks as a potential satellite strategy for
(06:36):
higher returns. Now that we've laid out the pros and cons.
The next question is, how do you actually decide whether
to invest in individual stocks, ETFs, or a mix of both.
The truth is the answer depends on your goals, your timeline,
your risk tolerance, and just as importantly, your lifestyle. One.
(07:00):
Define your investment goals before you choose. You need clarity
on why you're investing long term wealth building for retirement.
Broad market ETFs are often the safest and most reliable
choice for compounding over decades, supplementing income through dividends. You
could use a dividend focused ETF or hand pick strong
(07:20):
dividend paying stocks. High growth speculation individual stocks, especially in
sectors like tech or biotech, may offer the upside you're
looking for, but come with greater risk. When you know
your goal, the path becomes clearer. Two. Understand your risk tolerance.
Here's a quick self check. If your investment dropped thirty
(07:43):
percent in a year, would you A buy more because
it's on sale, B, hold steady and wait it out, CE, pan,
exel everything. If you answered C, individual stocks might not
be for you, especially high volatility one ones. ETFs generally
smooth out market swings, making them easier to hold through downturns. Three.
(08:08):
Assess your time commitment. If you enjoy research, reading company reports,
following industry news, and making strategic moves, stocks might fit
your personality. If you want to set it and forget
it approach, ETFs are perfect, buy hold and let them
grow with minimal intervention. Remember time is an investment too.
(08:31):
If you don't have hours each month to track individual companies,
lean toward ETFs. Four. Consider the hybrid approach. You don't
have to choose one over the other. Many investors use
a core satellite strategy. Core eighty ninety percent of your
portfolio in diversified ETFs for stability and growth, satellite ten
(08:53):
twenty percent in individual stocks you believe in or want
to speculate on. This way, you get the stability of
broad diversification while still leaving room for potential high return opportunities. Five.
Practical example the core satellite portfolio for a beginner. Let's
say you have five hundred dollars to start. Four hundred
(09:16):
dollars goes into an s and P five hundred ETF
broad market exposure fifty dollars goes into an international ETF
Global diversification fifty dollars goes into one company stock you're
excited about, for example, a brand you love and understand.
Over time, you add to each position, keeping your portfolio balanced.
(09:37):
This gives you the psychological benefit of both safety and excitement.
Six the emotional factor. Stocks can be thrilling but also
nerve racking. ETFs are are less exciting, but that's often
a good thing. If you know you're prone to emotional decisions,
leaning on ETFs as your foundation can help you avoid
(09:58):
panic moves that hurt law term returns. All right, Now
that you understand the differences pros, cons and decision making process,
let's talk about taking action. Because all the knowledge in
the world won't help if you never make your first investment.
Step one, choose your platform. You'll need a brokerage account
(10:21):
to invest in either stocks or ETFs. Look for one
with low or no commissions. Many platforms now offer commission
free trading fractional share options so you can invest small
amounts in high priced stocks. Easy to use interface, especially
if you're new. Examples include Fidelity, Vanguard, Charles Schwab, Trade Republic,
(10:43):
and Scalable Capital. Step two, open and fund your account.
Don't over complicate this even starting with twenty five dollars.
Fifty dollars is enough to begin. Link your bank account,
transfer the funds, and you're ready to invest. Step three
decide on your mix. Use the core satellite method. We
(11:03):
discussed core broad market ETFs like FU SPY or VTI
for US exposure, VXUS or AIFA for international exposure. Satellite
one or two individual stalks you believe in. If you're
not sure, start one hundred percent ETF and gradually introduce
(11:23):
stocks as you gain confidence. Step four set up automatic contributions.
Consistency beats timing. Automating monthly investments ensures your building wealth
steadily regardless of market ups and downs. Step five track,
but don't obsess. Check your portfolio monthly or quarterly, not daily.
(11:45):
This keeps emotions in check and allows your investments to
work without constant interference. Step six keep learning and adjusting.
Markets change, company's rise and fall, new ETF's launch. Keep
your financial education going through books, podcasts, Yes like this one.
I'd reputable financial news pro Tips for beginners. Reinvest dividends
(12:06):
automatically for compounding, Avoid chasing hot stocks or trends without research.
Review your portfolio yearly, and rebalance if one area grows
too large, always keep a separate emergency fund. Never invest
money you might need in the next three to five years.
Choosing between stocks and ETFs doesn't have to be in
(12:26):
either or or decision. ETFs provide stability, diversification, and low maintenance,
while stocks offer potential for higher returns and a more
personal connection to your investments. By combining both in a thoughtful,
intentional way, you can build a portfolio that grows with you,
(12:46):
matches your goals, and fits your lifestyle. And remember you
don't have to wait for the perfect moment. The best
day to start was yesterday. The second best day is today.
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