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Why do we use ETFs at Gamepick?
At Gamepick we take your investing very seriously. We always have your best interest in mind. ETFs are the best way to offer investors a diversified portfolio of investments while keeping investor costs as low as possible.
What is an ETF?
An exchange-traded fund (ETF) is a publicly traded security that combines the flexibility of a single stock, but the portfolio diversity of a mutual fund. ETFs make it more affordable for investors to access a variety of assets . ETFs are funds that trade on exchanges that follow specific indexes or industries. They are like a collection of different stocks and/or bonds into one single investment
When an ETF is purchased, the investor owns a percentage of all assets held within that ETF. For example, one of the most well-known ETFs on the market is the Vanguard Total Stock Market Index Fund ETF (VTI), VTI currently holds over 3,700 different stocks. It would be very difficult for any one investor to create portfolio diversity and purchase all of these stocks without purchasing an ETF.
Why does this matter and why not just buy single stocks?
As an investor, it is important to diversify all assets owned and minimize risk. An ETF is an affordable and flexible way to access a broad range of assets while keeping risks low. Buying single stocks or “stock picking” is one of the most risky ways to invest in the stock market. Let’s look at an example from 2023. In April of 2023, Bed Bath & Beyond (BBBY) declared bankruptcy. According to Forbes, this 52-year-old company had cash issues because their expenses were greater than their revenues.
If an investor was not in tune with the market and what was going on, they would have missed the signs of what was happening. If the investor held BBBY shares directly, the investor would have suffered the entire stock loss directly. However, when a security like BBBY is held in an ETF, this loss is spread among the other 3,900 securities held within the fund. Often, an investor will see no real impact on the overall share prices day-to-day when a single security files for bankruptcy and losses are taken.
How do Mutual Funds compare to ETFs?
You may have heard of mutual funds before, but what is the difference between mutual funds and ETFs? Simply put, humans manage mutual funds, and computers manage ETFs. As such, mutual funds cost more to own year-over-year as they have a higher expense ratio, whereas ETFs are much more affordable. Additionally, EFTs can be traded at any given point during a trading day, where mutual funds are executed only once per trading day at the end of the day.
In summary, ETFs are a low-cost approach to diversified investing. They are an easy way for investors to purchase investments in the stock market without having extensive knowledge about trading trends, individual stock details, and sector risks. This is why Gamepick invests in ETFs.
For a complete list of investment holdings, please reference our investment disclosure.