Stocks are certainly more interesting to own than exchange-traded (ETFs) funds. They offer investors a chance to outpace the market and also provide for more active participation in the direction of a company via shareholder votes held at annual meetings.
But ETFs are an ideal option for most portfolios. Like mutual funds, these baskets of stocks offer built-in diversity that curbs the typical volatility of individual equities. Yet unlike mutual funds, ETFs can be bought and sold during a trading day like a stock. Best of all, exchange-traded funds come in a wide range of sector, style, geographical, and market cap categories, and are regularly rebalanced by their issuers. All you have to do is develop an allocation strategy, pick ETFs to fill those slots, and let time do the work for you.
That's what makes ETFs ideal for individual retirement accounts (IRAs), which tend to be the parking place for money meant to become a nest egg for later. It can be easy to squander a portfolio of stocks just because it's tempting to buy and sell them too often. ETFs lend themselves to a buy-and-hold strategy.
Source Fool.com