Stock Vs ETF: Difference Between ETF and Stock | My Espresso

Stock Vs ETF: What is the difference

Investors have diverse options for investing in the stock market. They can invest in individual stocks and start trading, or they can invest in Exchange Traded Funds or ETFs. These ETFs are a collection of securities traded on the stock exchanges. This article will tell us the major differences between Stocks Vs ETFs. Before we move on, let’s first understand stocks and ETFs.

Published on 03 February 2023

What is a Stock?

A stock is also known as equity. It gives shareholders a piece/part of a company. The more shares you purchase, the more ownership you have of the company. If the company loses money, you lose money; this happens as the value of your stock goes down. Various companies even offer dividends or payments to shareholders.

This company has to be publicly listed.

What is an ETF?

An ETF or Exchange Traded Funds come into the picture when you want to diversify your investments. You don’t want to risk losing all the eggs in a basket, and you want a basket of stocks. You choose to broaden your investment horizon and buy diversified stocks. Also, EFTs can contain stocks, commodities, bonds and various individual securities. We can say that in ETF Vs Stock, ETFs are considered to be a safer option as they have a broad diversification.

Stock Vs ETF -The Differences

Now, let’s look at the ETF Vs stock and the major key differences between the two.

The number of shares

The first key difference between stock Vs ETF would be the variation in the number of shares.

When a company opens its IPOs, they only issue stocks fixed in number; this number doesn’t change often.

On the other hand, ETFs attempt to achieve the net asset value, i.e., the average share price of the stocks. To achieve this net asset , the ETF tries to adjust the number of shares to raise or lower the value of the share.


Primarily, investors are looking to create a diverse portfolio for themselves, meaning that they have invested in various stocks or assets. This would include stocks, bonds, mutual funds and even real estate. Hands down, ETFs offer great diversification containing stocks from different industries.

Note: Not all ETFs will provide you with diversification—for instance, the ones from a single industry.

Risks related to Stocks Vs ETFs

The stock market is known to be volatile. Hence, making it risky. There’s always the risk of inflation, liquidity, interest rates etc. However, people diversify their investments, reducing the risk and making ETFs slightly less risky.

An ETF spreads out risk by spreading the holdings across different markets.

When to invest in Stocks Vs ETFs

Investing in the stock market would be a good option for you if:

  • Your risk-taking capacity is high;
  • You’re trying to outdo the market;
  • You’re trying to make your investment portfolio look good

On the other hand, investing in ETFs would be good if:

  • Your risk tolerance is not high
  • You’re looking to invest as a long-term investor
  • You want to have a diverse investment portfolio


It is essential that you know what you’re looking for. If you want a share of a company’s profits, then investing in stocks is meant for you.

In contrast, if you want the share of a large basket of stocks, then you should go for an Exchange Traded Fund. Investing in stocks is much riskier, but it can yield higher returns; investing in ETFs is relatively low risk with low profits but much more stability.

Chandresh Khona
Team Espresso

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