The Biggest Advantage of low cost ETFs is they are boring.
A low cost broad based ETF like Vanguard’s all American stock market (VUN), which I own, has thousands of stocks in its portfolio. As a result, it doesn’t go up and down too much every day. It’s boring and that’s a good thing. Because it’s so boring, I feel no temptation to watch its everyday movements. Months can pass before I look to see what its price is and I don’t even remember what I paid for it. That’s the best way to invest. Buy low cost broad based ETFs and forget about them for 10 or 20 years.
I have realized over the past 25 years that impatience is the biggest problem investors face. Even if you get it right with your individual stock purchase this time, what about next time, and the time after that? Picking individual stocks and then flipping them later for something new is not a long term sustainable model for investing. You will get it wrong eventually and that could cost you many years of gains.
I know it can be exciting and addicting to watch your stock pick go up 20% in a day. But I also remember my stock losing 80% of its value over a few months. Thankfully, I was young and poor in the late 1990’s so the lesson I learned was worth every penny I lost.
You can’t beat the market over 30 or 40 years by buying and selling individual stocks. It’s just too hard. The quicker you figure this out, the better it is for your future self. Good investing should be as interesting as watching paint dry.
I’m a department head for a high school in Toronto. I graduated from the Ivey School of Business at Western University and have been a DIY investor for over 20 years.