Many investors ask the same question: stocks or ETFs? They hold their own advantages and disadvantages, but everything changes when you consider international stocks and ETFs. China and Japan are two of the best options when it comes to trading internationally. Do you know which is the better investment in this market?
All-Day Trading
Stocks are traded during certain times during the day and can only exchange during business hours. This is great for people that don’t want to spend all day watching their investments, but this can be a significant disadvantage if your stock isn’t doing well. Shareholders are forced to wait until the exchange opens before they can sell their stock, and by that point, they may have already experienced loss.
Unlike stocks, ETFs are traded on a regular basis throughout the day. Investors can purchase throughout the day, spend as many or as few hours as they want on their own schedule. If it looks as though one of their ETFs aren’t performing as well as hoped, shareholders can sell without having to wait for the market to open.
Less Risk
Many people believe that ETFs have less risk when compared to stocks. When you invest in stocks, you’re putting all of your eggs in the same basket. If the stock performs poorly, then you risk losing your profits very quickly. Investing in an ETF is a collection of assets and securities in a bundle. If one portion of the ETF doesn’t do well, it may only affect your ETF slightly. However, you don’t have as much control over the assets included in the ETF.
Currency Risk
Participating in international ETFs and stocks puts you at a risk of currency risk. Currency risk is when there is a potential for the currency of a nation to drop in price, which could cause you to lose profit. While this is a problem for both ETFs and stocks, ETFs may be affected less because the assets may be in various areas. For example, if the yen declines in value, your stocks with the renminbi may continue to hold steady.
Country Stability
Over the years, China’s stock market has been recorded as being volatile, but in recent years, the volatility has calmed. China’s stock market is becoming much more stable and has even reached its lowest level of volatility since 2000. Japan is also following suit with an extremely calm market. Shareholders now have the chance to invest without having to worry whether the currency risk will ruin them. Again, investing in an ETF can lower the chance of investor in case the market becomes volatile in the next few years.
