Listen to The ETF Store Show every Saturday at 4pm on KCMO Talk Radio 710AM as we cover everything you need to know about Exchange Traded Funds and the world of investing.
On our most recent radio broadcast, we discussed a number of key headline events currently permeating the financial markets, including the much anticipated Facebook IPO and JP Morgan’s massive trading error. Investors in both of these companies have rudely found out, if they weren’t already aware, that investing in individual stocks (and especially IPOs) can pose significant challenges. As regular listeners of our radio program know, we talk all the time about the inherent riskiness involved in trying to select individual stocks. There are just too many factors, many of which may be unknown to investors (see Morgan Stanley’s lack of disclosure regarding Facebook’s revenue estimates), which can derail what seem to be good stock picks. That’s not to mention that individual investors are trying to compete against Harvard MBAs working 80 hours a week on Wall Street with direct access to the CEOs and CFOs of the companies they’re trying to invest in. Add in the fact that from 1989 – 2008, 21% of all stocks listed in US markets became bankrupt and you’re looking at a recipe for underperformance. Simply put, statistically, you’re much better off investing in low cost, passively managed investments such as equity ETFs than trying to select individual stocks.
All that being said, we realize that there are some investors who are determined to bet on companies like Facebook and JP Morgan. So we’d be remiss if we didn’t mention that there are ETFs that will allow investors to gain exposure to both of these companies without putting all of their eggs in one basket. If you must invest in Facebook or JP Morgan, listen to our full show here to learn more about which ETFs you can look at to gain exposure. You can also listen to our most recent weekly market update.
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