Hi Impatient Investors

What is “ETF and Chill?

We often hear about “ETF and chill,” or “index funds and chill,” this just means buying index funds on a regular basis instead of picking stocks. In another post, we mentioned opportunity costs and the stock market is filled with it. You bought AMD instead of NVDA or GOOGL instead of AAPL, there is always a choice. Index try to capture a basket of stocks to prevent that choice, its diversification within a single security. ETFs are essentially the same as index funds with minor differences. ETFs can be more actively traded. The term is index and chill but we will focus on ETFs for this post.

Are Index funds or ETFs really better?

In terms of doing market research and deciding between stocks, ETFs are far superior. But, the basket of stocks can have a bad apple that reduces the performance of the ETF in general. There are sector ETFs, in the first paragraph we mentioned AMD vs NVDA, both would be placed in a semiconductor ETF, no decision to be made. There are also market ETFs such as QQQ or SPY, in which case all the stocks mentioned above would be included, again no decision. So in terms of diversification, ETFs win.

In terms of profit potential, individual stocks will beat an ETF, but with more profit, comes more risks of losing. Risk, reward as they say.

Is ETF and Chill Really Better?

No one is quite sure whether ETFs or individual stocks are better, maybe one works better for your investment style. But, of course, on this site, we will put it to the test. We will be comparing the wheel strategy to ETF and chill. So, let’s conduct an experiment. The ETF will be DIA, it pays monthly and contains many of the large stocks in the company, similar to the Dow Jones. The wheel strategy will have any basket of stocks for any given week.

Competition Rules

Rules are to start 2 portolios with a value of $2500 each and the only rule is to water each with 500 a month. The only difference is the accounts. One will utilize the wheel strategy while the other will have an ETF (DIA), buying in full every time the money is added. The wheel strategy will be actively traded while the DIA is hands off.

Let the games begin. Coming Dec. 1st

Stay tuned!