ETFs vs. individual stocks: pros and cons of each

ETFs (Exchange-Traded Funds) and individual stocks are popular investment instruments in Singapore. ETFs allow investors to diversify their portfolio by investing in a basket of assets, while individual stocks offer the potential for higher returns but with a higher risk. Both have pros and cons, making it essential for investors to understand which instrument is better suited for their investment goals. This article will discuss the advantages and disadvantages of trading ETFs and individual stocks in Singapore.


ETFs have become increasingly popular in Singapore, with more investors considering this instrument for their investment needs. ETFs offer several benefits, making it a preferred choice among many investors. However, like any other investment instrument, ETFs also have drawbacks that investors must consider before investing.


There are several advantages to trading ETFs in Singapore. Acknowledging these will allow traders to make informed decisions about their investments.


One of the most significant advantages of trading ETFs is diversification. An ETF provides exposure to a basket of assets, reducing the risk associated with investing in a single stock. Therefore, investors are not solely relying on one company’s performance but instead spreading their investment across multiple stocks.

ETFs allow traders to gain exposure to different sectors, industries, and countries without buying individual stocks. This diversification not only reduces risk but also allows investors to benefit from the growth of other markets. Investors can look online for ETFs that track specific sectors, such as technology or healthcare, and invest accordingly.


ETFs have lower fees compared to actively managed funds, making them a cost-effective investment instrument. Unlike mutual funds, ETFs do not require payment of front-end and back-end loads, reducing the overall fee and increasing investor returns.

ETFs charge lower Management Expense Ratios (MER) compared to mutual funds. MER includes the cost of managing the fund, administrative fees, and other operational expenses. A lower MER means higher returns for investors.


While ETFs offer several advantages, there are also some drawbacks that investors need to consider.

Limited control

One of the limitations of trading ETFs is limited control over the underlying assets. Unlike individual stocks, where investors have a direct ownership stake and can vote on company decisions, ETFs do not provide this benefit. Therefore, investors do not influence the management or decision-making of the companies included in the ETF. If there are underperforming assets within the ETF, investors cannot remove them from their portfolios.

Market fluctuations

Like any other investment instrument, ETFs are subject to market fluctuations. The value of an ETF can go up or down depending on the performance of the underlying assets. Therefore, if there is a market downturn, investors may experience losses in their ETF investments.

ETFs are also not immune to market volatility and price swings. In times of high market volatility, the value of an ETF can fluctuate significantly, causing uncertainty for investors.

Individual stocks

Individual stocks have been a popular investment instrument for many years, offering the potential for high returns. However, investing in individual stocks also comes with pros and cons that investors need to consider.


Investing in individual stocks offers several benefits that make it a preferred choice for many investors.

Higher returns

Individual stocks have the potential for higher returns compared to ETFs because investors directly invest in a company’s performance and growth rather than a basket of assets. If an individual stock performs well, investors can benefit from capital appreciation and dividends.

Investors can choose high-growth stocks with the potential for significant returns. It allows for more control over investment decisions and the potential for higher profits.


Investing in individual stocks also offers flexibility compared to ETFs. Investors can buy and sell stocks anytime during market hours, giving them more control over their portfolios. Investors can choose which stocks to include in their portfolio based on their risk appetite and investment goals.

Investing in individual stocks also offers the potential for active management. Investors can monitor company performance, industry trends, and economic conditions to make informed decisions.


While investing in individual stocks can offer higher returns and flexibility, there are also some drawbacks that investors need to consider.

Higher risk

Investing in individual stocks comes with higher risk compared to ETFs. Since investors are exposed to a single company’s performance, they may experience significant losses if the stock underperforms. This risk is higher for smaller or newer companies with less established track records.

Individual stocks are also prone to company-specific risks, such as management changes, product recalls, or lawsuits. These factors can impact a stock’s performance and lead to investor losses.

Higher costs

Investing in individual stocks can also be more expensive compared to ETFs. Investors may incur trading fees and commissions when buying and selling stocks, impacting their returns. Additionally, active management of a stock portfolio may require research and analysis tools, which come at a cost.

Investing in individual stocks also requires diversification to reduce risk, which means investing in multiple stocks, which can be costly for investors with smaller budgets.

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