Europe has been undergoing waves of political, social, and economic changes; one of the most prominent being Brexit. These changes have left potential investors scrambling to figure out what is the better option when it comes to their market: stocks or ETFs?

All-Day Trading

For someone looking only to invest during certain hours, stocks are a good choice. However, a break from investing does not mean that your stock stops performing once the market has closed. This can be disastrous if certain events cause prices to decline dramatically when the market is closed, as investors/shareholders cannot sell their stock until the market opens.

When it comes to ETFs, they trade all day. This not only gives investors the flexibility to buy and sell according to their own schedules, if an ETF’s value drop dramatically, it can be sold immediately without having to worry about whether or not the market is open or closed.

Risk Level

When it comes to stocks and ETFs, investing in ETFs greatly reduces risks when it comes to potential losses as it is a collection of assets and securities. If a stock drops in value, it may not affect the ETF greatly, as perhaps other assets and securities are doing well in the market. When you invest in stocks, it is a win-or-lose situation.

Investing in a stock means allocating most of your investments towards it — if the stock falls, the loss is far greater than that of an ETF. There is, however, a chance that it can increase and a profit can be earned.

Currency Risk and Brexit

Given recent events, the currency risk for UK investors caused by Brexit is impossible not to mention in the investment world. After Brexit, the value of the British pound fell to a record low of $1.3224 against the American dollar.  While the Euro also saw a decline, it was less drastic than that of the British pound.

This is a prime example of currency risk — due to political changes within a country, its currency fell drastically in value, causing stocks and ETFs to fall as well. Here, if you had invested only in stocks in the British market you would have experienced significant losses. If you had invested in ETFs, however, you would have been less impacted by the dramatic fall of the British pound as an ETF has assets and securities from all across Europe. As well, the Euro is recovering faster than the pound.

Summary

In conclusion, if you wish to participate in investing internationally, the ETF is a better option due to the fact that its diverse collection of assets and securities help with lowering the risks of investment. When it comes to Europe and UK, Brexit serves as a good example of why ETFs can be less risky to invest in than stocks.

Featured Image: Depositphotos/© steafpong