There are enough debates about whether passive investing (ETF) is better than active investing (unit trust). In my opinion, each has its own strengths and weaknesses certainly. To be fair, I don’t think all ETF are good nor all Unit Trusts are bad.
Simplicity
Then, what about comparing between ETF and your own basket of handpicked stocks? As I love simplicity, so I prefer investing in individual stocks instead of an ETF. Sometimes, things might appear complicated on the surface, but in fact it could be simpler.
Nothing is free and easy
Stock picking is certainly not easy, but in my opinion it is simpler. If investors think that they can be more hands-off, simpler by investing into ETF, one thing that I would like to caution investors, they still need to know what the stocks composition are and what types of stocks are invested. Nothing is free and easy.
Control timing
As I want my portfolio to consist of only good quality stocks bought at the reasonable price. Therefore, investing ETF is then against my style. This is because at any one time when I want to invest, I have to buy a basket of stock, I can’t selectively exclude what is expensive and selectively include the bargain.
Control Portfolio weightage
Another reason why I prefer individual stocks instead of ETF, I prefer to have better control over the weightage of the sector exposure. Taking an example from an STI index which has about 30% weightage allocated to the 3 banks. As I don’t like my holding to be so highly concentrated (30% is high in my standard) at particular sector and furthermore I don’t find them having meaningful diversification (i.e the 3 banks of similar business risk. What is the point of picking several counters that have similar risk exposure? Shouldn’t we just pick 1 that is the best at managing their business and then reduce the exposure in that particular sector?). Therefore due to this, STI ETF, as an example, is not suitable for me.
Control Sector exposure
I prefer to control what sectors to be invested. For example, I am not interested in the agricultural, commodities, Offshore and Marine sector at this moment, so STI ETF, as an example, is not suitable for me. Instead of spending time, trying hard to search which ETF meets my criteria, I would rather spending time to research the companies that I am interested in. This would be easier.
I am like a Chef designing my own recipe
Picking stocks and designing my own portfolio, is like a Chef handpicked his raw material and designing his own recipe with its own flavour and character.
