Can ETFs and Stocks Coexist in a Portfolio?

an ETFs and stocks coexist in a portfolio and make that portfolio better? ETF or index ETF investing versus do-it-yourself dividend growth investing is always a big debate. You know I favor stock investing, but I keep an open mind. There is room for ETFs even if you invest in stocks.

I see both ETF investing and dividend growth stock investing strategies work very well. Should you put both in your portfolio? It depends. Let’s elaborate.

So yes, I see situations in which combining individual stocks with an ETF, or several ETFs makes a lot of sense.

Combining ETFs with some dividend growth stocks works well if you want to have several types of assets, exposure to several markets, and not have to spend too much time building that up and monitoring it.

You could start with an all-in-one ETF that has exposure to fixed income, maybe to some basic materials stocks, international markets, and the U.S. market. Use this to build your core portfolio without too much effort. Perhaps 50% of your portfolio is that ETF or split between two ETFs that don’t overlap. Your ETF is rebalanced automatically and gives you exposure to the markets and other types of assets like bonds or preferred shares that you want.

Then you add a few stocks that you like that you want to follow regularly, maybe a dozen stocks to complete the portfolio. This could work very well because you are well-diversified; a very smart way to build a portfolio.

It’s like cooking; you have your basic recipe and then add a few spices on the side, your special ingredients that make the soup even better. Start with an ETF that holds many ingredients and add a few dividend growth stocks as special ingredients.