figuring out the best place to invest
your money is no easy task are you
better off going with high growth high
risk companies like tesla that can go up
700 in one year but come crashing down
60
in the same space of time what about
diversified etfs like voo that give you
a very consistent but slow return of 10
but overall definitely don't give you
the massive profits that a growth stock
might have throughout this video i'll be
comparing stocks and etfs so that you
can make an informed decision on which
one is the best for you and is
ultimately going to make you the most
money jumping into individual stocks
which is most definitely the most
exciting out of the two these are
normally categorized by the market cap
or total size of the company you get the
market cap by multiplying the share
price by the current number of shares if
you search any major company or google
it'll have the market cap pre-calculated
for you now this is important because
the size of the company will dictate how
volatile it is if a company is only
worth a few billion dollars in
comparison to a trillion dollars it's
going to take far less money to drive
the price of it up or down as a
practical example you can look at the
price movements of the company neo which
had gone up two thousand percent from
2020 to 2021 however in the bear market
that we're currently in where there's
not a lot of money available you can see
that this trend happened in reverse and
it's come crashing down significantly at
this point in time its share price has
come down 60
and its current market cap is 38 billion
if you compare the price movements of
neo to apple which is one of the largest
companies in the world with a market cap
just over two trillion dollars in the
same space of time from 2020 to 2021
apple's share price had gone up 70 and
now with the current financial situation
where the majority of companies are
losing value apple has only gone down 20
in comparison to neos 60
so you can see as a practical example
how the market cap of a company can
influence the price movements of a
business if you put your money into a
high growth company like neo which is
just borrowing a lot of money and the
current value of the business is based
on the future perceived value that the
company will have as opposed to how much
money it's currently earning using a
metric like the p e ratio which is a
common figure that investors use to
determine if a company is overvalued or
undervalued can go out the window with
growth stocks something like tesla which
has a p ratio of 94 in comparison to the
s p 500 average which is considered to
be an accurate reflection of the overall
stock market has a p ratio of 21. so
something like tesla has a pe ratio four
times the average of the stock market
norm however this doesn't stop people
from investing into it and this can be
reflected from the stock price movements
of the company with an individual
business you're taking more risk because
all of your money is riding on one
company and if you're investing in a
growth stock this can be quite a roller
coaster in terms of how the share price
movements change from year to year if
you want a safer option when it comes to
individual stocks then there's also blue
chip companies which are well
established leaders in a specific sector
think companies like coca-cola microsoft
and apple these businesses have been
around for decades and they are amongst
the largest companies in the world while
they are individual stocks their market
cap is typically in the trillions and as
you saw from apple it's quite hard to
actually have a significant drop with
these types of companies if you're
someone that wants a bit more security
blue chip investments are a great place
to actually put your money if you're
someone that's happy with a bit more
volatility then growth stocks might be
more suited to you however when you're
picking an individual company then you
also have to do research on that
business if you're blindly following
people's advice that you might see on
youtube videos or instagram posts it's
quite easy to get burned because
normally these predictions can appear to
be accurate but it's normally when
there's a ball run happening and this is
just when the vast majority of companies
in the stock market are gaining value
and seeing increases in their share
price once you come into a bear market
like the one we have now then these
predictions don't seem so accurate
anymore and then only the companies with
true value will be able to hold their
stock price without massive drops so
doing your own research when it comes to
picking individual businesses is
critical to make sure that you don't
lose out and see a massive drop in the
value of your portfolio in comparison to
etfs which are exchange traded funds and
these are essentially just a collection
of stocks that are based on a particular
goal there are etfs which track the 100
largest companies in the world ones that
look at specific sectors of the market
like technology or new and innovative
companies such as those offered by the
arc innovation etf and there's also etfs
that track the overall performance of a
country's stock market in new zealand
there's the nzx top 50 in australia the
asx 200 and then also in america most
notably the s p 500 this is considered
to be the gold standard of investing and
when you buy into this you're getting a
small piece of the overall stock market
etfs are a great way to get diversified
access to the overall stock market in a
cheap way if you consider all the
brokerage fees you'd have to pay to get
the same number of companies in the s p
500 you would have to have 500
individual transactions to buy all of
these businesses in comparison to making
one investment of say a thousand dollars
into the s p 500 that 1 000 would be
spread out amongst all 500 companies in
that etf it also means you get a nice
consistent return of 10
which has been the average return for
the past 100 years of this investment
it's much more of a hands-free approach
or passive investing because you don't
have to do any research on the companies
you're always going to have targeted
exposure to the biggest companies in the
world and quite often there's also a
dividend payout so you can get a bit
more passive income from the strategy
having a balanced portfolio of etfs and
individual stocks is really a great way
to capture all the ups and downs of the
stock market itself potentially based on
how much risk you're willing to take you
might vary the ratio but about 50 50
between stocks and etfs is always the
very safe strategy now that you know the
difference between stocks and etfs how
do you actually go about buying these
check out this video on screen to see a
complete step-by-step guide of how to
actually invest in the new zealand stock
market from picking the right broker
getting the money available to invest
and then finally a step-by-step tutorial
on how to actually purchase shares of
some of these investments