When I first decided to start investing, I was staring at my brokerage app like it was a foreign language exam. There were ETFs, individual stocks, index funds, options, REITs—I didn’t even know what half those acronyms meant. But the first major fork in the road was this: ETFs vs individual stocks for beginners. Which one should I start with?
Spoiler: I started with both—but not at the same time. Let me walk you through what I learned, how I made my decision, and what I wish I knew sooner.
What’s the Difference Between ETFs and Individual Stocks?
Before we jump into which one is better to start with, let’s break down what these two things actually are.
Individual Stocks
Buying a stock means you’re buying a piece of one specific company. If you buy a share of Apple (AAPL), you own part of Apple. Your success is directly tied to how Apple performs—if the stock price goes up, you win. If it tanks, well… you learn a hard lesson.
ETFs (Exchange-Traded Funds)
ETFs are like baskets of stocks. When you buy an ETF, you’re buying a small slice of a whole bunch of companies—sometimes hundreds. For example:
- VTI = A slice of the entire U.S. stock market
- VOO = S&P 500 (the top 500 U.S. companies)
- VYM = High-dividend stocks
Think of ETFs like buying a whole pizza with different toppings. Buying a stock is like picking just one slice.
My First Investment (And Why I Chose an ETF)
When I had my first $100 to invest, I didn’t want to bet it all on one company. I was nervous. What if I picked the wrong stock? So I started with VTI—a total market ETF. That way, I was investing in over 4,000 companies at once. Even if a few companies in the fund had a bad year, I’d still be okay because the rest would balance it out.
I felt like I had a financial safety net. Plus, it meant I could start investing without having to become a stock-picking expert overnight.
ETFs vs Individual Stocks for Beginners: The Key Differences
Let’s break this down in a beginner-friendly way.
Feature ETFs Individual Stocks
Diversification Built-in (many companies) One company only
Risk Level Lower Higher
Research Needed Minimal Moderate to High
Potential Upside Steady and long-term Can be high, but risky
Hands-On Needed Very little Needs monitoring
Good for Beginners? Yes Depends on your approach
Why Beginners Might Want to Start With ETFs
1. Built-In Diversification
With a single ETF, you’re spreading your money across many companies. That way, if one company tanks, you’re not wiped out.
I liked the idea of not putting all my eggs in one basket—especially because I had no idea how to read a balance sheet or earnings report at the time.
2. Less Stress = Less Guesswork
ETFs are “set it and forget it” friendly. You don’t have to track earnings calls or watch for sudden price swings. That made it easier for me to focus on learning without freaking out over every little stock dip.
3. You Still Get Growth
Just because ETFs are safer doesn’t mean they’re boring. Some ETFs, like those tracking the S&P 500 (like VOO), have returned around 10% annually over the long run.
When It Makes Sense to Try Individual Stocks
After a few months of investing in ETFs, I felt more confident and wanted to dive deeper. That’s when I started researching and buying individual stocks. Here’s what I realized:
1. You Can Learn a Ton
Picking individual stocks forced me to really understand a business—how it makes money, what risks it faces, and how it competes. I treated it like a research project (and actually enjoyed it).
2. The Upside Can Be Bigger
If you’d invested in Amazon or Apple early on, your returns would’ve destroyed any ETF. Of course, hindsight is 20/20, and I wasn’t trying to hit a home run on day one. But for someone who loves learning about companies, individual stocks can be more exciting.
3. You Can Invest in What You Believe In
I picked Microsoft as one of my first stocks because I believed in their long-term growth. I used their products every day, and they seemed like a solid bet. Owning the stock made me feel more connected to the brand—and more motivated to follow business news.
So… ETFs or Individual Stocks First?
If You’re Brand New and Want to Keep It Simple:
Go with ETFs.
Start with something like VTI, VOO, or SCHD. You’ll get diversified exposure, lower risk, and peace of mind. It’s like putting your investments on autopilot.
If You’re Curious and Willing to Learn:
Start with an ETF and one individual stock.
That’s what I did. I used ETFs as my “core,” and experimented with small positions in individual stocks. It let me learn without betting the farm.
Common Mistakes to Avoid (Yes, I Made Some)
1. Chasing Meme Stocks
I got swept up in the GameStop and AMC craze for a hot minute. It was fun, but I lost money and learned quickly that hype ≠ smart investing.
2. Going All In on One Stock
One of my coworkers put all his early investment into Tesla. It worked out for him—but it could’ve just as easily gone the other way. Diversify. Always.
3. Ignoring Fees and Expense Ratios
Some ETFs charge higher fees than others. For beginners, stick with low-cost index ETFs from providers like Vanguard or Schwab.
Final Thoughts – Build a Mix That Fits You
The beauty of investing today is you don’t have to choose one or the other. With fractional shares and no-fee brokerages, you can build a portfolio that includes both ETFs and individual stocks—even with just $100.
If I were starting over today, here’s what I’d do:
Put 80–90% of my money in broad market ETFs (like VTI or SCHD)
Use the remaining 10–20% to slowly experiment with companies I believe in
Keep learning as I go
At the end of the day, the best investment strategy is one you actually stick with. So whether you start with ETFs or dip into individual stocks, just make sure you start. The earlier you begin, the more time your money has to grow—and that’s the real win.
Got $50? $100? Start there. You don’t need to know everything—just enough to make one good decision. Then build on it. That’s exactly how I did it.
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