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Abrar

Is EFTs safe?

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Hello, I am Abrar; a Forex trader. I am interested in taking part in EFTs investment. Someone says it will be risky for me. Is it true? Is EFTs safer than stocks? Can anyone suggest to me!

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Hi Abrar,



In short, what you are asking is if ETFs are less riskier than stocks since the major concern for any investor is the risk involved. ETFs, like all other investments, come with a degree of risk. To answer your question about which is better between ETFs and stocks, please read on.

The good thing about stocks is that they give you more power over your investment and make you a decision-maker(as a shareholder) in certain companies.
ETFs, on the other hand, are managed by a fund manager giving you little control over how matters concerning the investment are run.
To determine which one is more favourable, you would have to look at volatility. This is because decreasing volatility is the best way to moderate risk. Considering this, ETFs emerge on top of stocks because as a fund, they are spread among different investment vehicles making them less volatile than stocks.











Similarly, ETFs offer an advantage over stocks when you don’t have time to get enough information about a company to make an informed decision. This is because someone else has done all the research and settled on a combination they see as the best.

That said, the risk of any ETF depends on its combination and you should, therefore, research thoroughly before investing to know what the ETF is made up of.

 


The bottom line is that ETFs are less riskier than stocks though the returns may be smaller. In that case, if you are risk-averse, you should go for ETFs.

 

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