Smart Reasons to Save, Use and Invest Money

How My Investments Are Changing, Mutual Funds and ETFs Versus Stocks

I love trading stocks, it’s like playing a game of chess with everybody that is in the stock market all at once.

That said, the majority of my money is in mutual funds and to a lesser extent, ETFs.  ETFs are Exchange Traded Funds and are similar to mutual fund, except they are usually tied to some type of index.  The big advantage ETFs have over mutual funds are their lower fees associated with the instrument since it typically just follows an existing index.

So as often as I blog about how much I love dividend stocks and the creating dividends streams to cover expenses like my dividend lunch experiment, I still have the majority of my money in mutual funds.

Why do I have most of my money in mutual funds and etfs?

Mostly because I’m too busy with other things to give stocks the full attention that deserve.  While most days I keep up and follow them, occasionally, a week may go by where I don’t log onto my brokerage account at all.  Since the stocks that I invest in mostly have a higher beta (this means they are more risky), I don’t want to put all of my money in these volatile stock without constantly monitoring them.

Mutual Fund and ETFs either have a manager managing the funds or are tied to an index of some sort that determines which stocks are in the fund by shadowing the movements of stocks in that index.  This means that if something happens to a stock, the manager will remove it or the investment will drop off of the index.  Neither mutual fund or ETFs are quick, but they will get the job done if  they have to.

Why I’m increasing the amount of stocks I have versus mutual fund and etfs!

One basic reason that my ratio of stocks vs other investments are increasing is because my stocks are appreciating faster.  Another reason is that I’m investing more of my money in them.  I’m still putting the same amount of money in my 401k (this is where most of my mutual funds exist), but I’m also putting money that I now save from paying off my mortgage early into stock investments too.

I’m mostly concentrating my new money saved on dividend yielding stocks, because they are a bit less risky in these roller-coaster stock market days.

Another reason I like stocks is because I don’t have to pay taxes on them until I sell them.  With mutual funds, I usually have to pay taxes on the rollover of stocks within the mutual fund.  That said, since I mainly have index funds, the amount of rollover is low so my tax hit from them is very low.

I find that I don’t believe it has to be one or the other.  Both are investments and should have a place within your investment portfolio.  In addition to stocks, I’m starting to look into other passive income ideas, perhaps real estate, but that’s another topic for another day.

Surprisingly, my portfolio is now only made up of 64% mutual funds and ETFs, where as a few months ago, the percentage was over 70%.  I’m sure it’s a fluke and the mutual fund percentage will rise over 70% again, but is noteworthy…

What percentage of your investment portfolio is invested in mutual funds and ETFs?



11 Responses to How My Investments Are Changing, Mutual Funds and ETFs Versus Stocks

    • Smart move on your part! let the mutual funds take care of that stuff. Stocks are a hobby for me, and a place to experiment with. I think someday, I’ll mostly be in mutual falls or really etfs…

  1. I too don’t own any stocks as of yet but I am looking into it. I currently have index funds but I am looking at adding to that. It really depends on who you talk to what the best strategy is. Different things work for different people. Index funds though are easy to manage which is a nice perk.

    • I know this is going to sounds bad, but lately, I’m a bit worried about index funds. Smart people are writing programs to take advantage of the behavior of index funds (I think).

      But who knows, perhaps they still are good 🙂

  2. I had to bust out my spreadsheet for this one.
    22% in individual stocks. I’m pretty sure this ratio went up recently like your.
    I will try to convert most of that 22% into dividend stock in the next year or so. I just don’t have time to follow the stocks closely.

  3. I hold several stocks as you probably noticed in my public portfolio. However, I am fully indexed when it comes to my retirement savings with a good chunk of short term bonds to balance my wild energy stocks 😉