📊 Stock & ETF Trading
How to Trade ETFs vs Individual Stocks
ETFs vs stocks: when to choose diversification, how to judge liquidity and spreads, and the strategies that fit each best.
Key Takeaways
- •ETFs = diversification + lower single-name risk
- •Judge ETF liquidity by underlying basket, not just on-screen volume
- •Use ETFs for trend/rotation; pick stocks for idiosyncratic edges
Pros & cons
ETFs
Pros: Diversified, typically tax-efficient, small expense ratios
Cons: May have tracking error and spreads
Stocks
Pros: Higher upside (and downside), earnings catalysts, more research edges
Cons: Earnings risk, single-name concentration
Liquidity & execution
- •Check bid-ask spread and iNAV/NAV premium on thin ETFs
- •Prefer limit orders, especially near open/close
Strategy fits
ETFs
Trend following, sector rotation, risk-parity.
Stocks
Earnings momentum, turnaround plays, deep research edges.
Costs
ETFs: Expense ratio + hidden spread cost.
Stocks: Consider earnings gaps and slippage.
When to choose what
Choose ETFs when:
- • Trading broad market trends
- • Implementing sector rotation
- • Want diversified exposure
- • Risk management is priority
Choose stocks when:
- • You have company-specific research edge
- • Trading earnings momentum
- • Seeking higher potential returns
- • Playing specific catalysts
Practice Both
Pick one broad-market ETF and one sector ETF to practice execution with limit orders this week.
Frequently Asked Questions
Low ETF volume = bad?
Not always—if underlying is liquid, execution can still be fine.
Use stops on ETFs?
Yes—same as stocks.