October 16, 2021
5
 min read

Stocks, Mutual Funds, and ETF’s - Oh My

Your account is open, the money has transferred, but now you're thinking, "um, what do I invest in?!"

In my last post, we spoke about getting started investing in the stock market and discussed the necessary steps to get started on your investing journey. Your account is open, the money has transferred, but now you're thinking, "um, what do I invest in?!"

To paraphrase Rounders, an all-time great movie, "The table is set up, your fork, your knife, your A1 sauce, now all you need is the steak!" Allow me to introduce you to the various investment options to focus on when investing your money. 


Allow me to introduce you to Stocks, Mutual Funds, and ETF's through the lens of sports, as I think they become very relatable in comparison.

 

Stocks (The Tennis Player):

When you invest in a stock, you're investing in a particular company. Take Apple, for example. You're placing your trust that Apple will succeed, and if it doesn't, neither will your portfolio. As you're selecting stocks in your portfolio, understand you're looking for the greats like Serena Williams to add to your account.


Mutual Funds (NFL All-Star Team):

Hut, hut, hike! Unlike stocks, mutual funds are typically run by a money manager (the coach!), and a mutual fund invests in a series of stocks, bonds, and other different securities (the players). The average mutual fund holds over one hundred different stocks; think of it like the NFL All-Star Team; each player is handpicked because of their success, which builds a star-studded roster. So, if one player (or stock) does poorly, you lose significantly less because it is a small part of the portfolio. Hopefully, your mutual fund has many Tom Brady's on the team!


ETF's (The Coach):

An ETF is a security that tracks an index, like the S&P 500, a Sector, such as Health Care, or other assets. Let's think of an ETF like an NBA Coach. If the index does well, the coach is lauded for his success. He isn't a player on the field, but his success tracks the performance of his players. So, if you buy an ETF that mirrors the S&P 500, and the index grows in value, you can expect that same growth in your portfolio. ETFs can be an excellent investment for newer investors in the stock market because of the diversification, low investment minimums, and hands-off maintenance.


Final Thoughts: 

I know the stock market seems like a mystery for many people, and I suppose, without some understanding, it probably is. I hope the references towards sports make it all seem a little easier, and if you're not into sports, relate it to something that works for you. 


Over my career in finance, I've understood the market, but I haven't always been confident in selecting stocks to build a portfolio. A hands-off approach has given me more significant results, but I want to put that to the test. How do we do that? Competition, of course! Moving forward, these posts will serve to teach financial concepts while putting my PersonaFi network to the test. As I am here to guide you through these posts, I will be learning at the hands of my network, and I am confident that what I learn will help achieve results in my portfolio, and it can work for you.





Robert LaMacchia is a content writer for PersonaFi. He is interested in a wide range of topics from personal finance, business strategy and international technology. Follow Robert on the PersonaFi app at @rlamacchia.

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