Scared of Stocks? This Might Be a Better Bet for You

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Here’s another great option to consider for your portfolio. 

You’ll often hear that if you want to grow a lot of wealth over time, buying stocks is the way to go. You could of course load up on safer investments, but adding stocks to your brokerage account might result in stronger returns that make it easier to meet your long-term financial goals.

But the idea of buying stocks can be daunting to some people. Recent Motley Fool research found that only 58% of U.S. adults own stocks. For the 42% of Americans who don’t, the reason could boil down to fear.

If you’re nervous about choosing stocks and landing on the wrong ones, a better bet may be to invest in the broad market instead. And there’s a really easy way to do that.

ETFs could be your ideal investment

ETFs, or exchange-traded funds, are passively managed funds that track different market segments or benchmarks. You can buy ETFs that focus on energy, healthcare, or real estate, just as a few examples.

You can also buy ETFs that track the stock market broadly. The S&P 500 index, which consists of the 500 largest publicly traded companies, is often used as a measure of the stock market’s performance. So if you load your portfolio with S&P 500 ETFs, you’ll gain exposure to many types of companies without having to stress out about choosing the wrong ones or having to research businesses individually.

In fact, one of the things that makes ETFs such a great investment is that they lend to a diverse portfolio. And the more diversified you are, the greater your chances of being able to ride out stock market downturns while keeping your losses to a minimum. ETFs could also help you grow your portfolio nicely over time.

How to buy ETFs in your brokerage account

Buying an ETF in your brokerage account is similar to buying stocks. You just put in the name of the ETF you want to buy or the ticker it trades under and decide how many shares you want to own.

Many brokerage accounts even let you buy ETFs on a fractional basis. So, let’s say a given ETF is trading at $200 a share, but you only have $100 to add to your brokerage account. In that case, you could purchase half of a share — the ETF in question won’t necessarily be off limits.

One thing you should know is that your brokerage account is likely to charge you a fee for buying shares of an ETF. But ideally, that fee will be pretty minimal. Still, that’s something that’s good to know about so there aren’t any unpleasant surprises.

It’s easy to see why the idea of buying stocks on a company by company basis could be scary to you. If that’s the case, but you’re looking to grow your portfolio at a decent pace, then ETFs could be a reasonable alternative to fall back on. And you may find that buying ETFs eases a lot of your fears and makes you more comfortable with the idea of putting your money into the stock market.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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