By Philippa Billings, Chief Advice Officer, Otivo
The choice between ETFs and individual shares is really a choice between two temperaments. One spreads your money across a whole market in a single trade and asks you to sit still. The other lets you back your own judgement on specific companies and live with the consequences. Neither is wrong. But they suit different investors, and different appetites for attention. Here's how they compare.
ETFs and individual shares both trade on the exchange, but they suit different approaches. An ETF spreads your money across many holdings in one trade, offering instant diversification, while buying individual shares concentrates it in specific companies you choose. As at July 2026, many investors use both, ETFs for broad exposure and shares for particular convictions.
What's the core difference between ETFs and shares?
It comes down to spread versus focus. An ETF holds a basket of investments, so a single purchase gives you exposure to many companies at once. An individual share gives you exposure to exactly one company. That single distinction ripples through everything else, the risk you carry, the effort involved, and the kind of returns you can expect. Understanding it is the foundation for weighing the two.
What are the advantages of ETFs?
The headline advantage is diversification with very little effort. One trade can spread your money across an entire market, which softens the blow if any single company stumbles. ETFs also tend to be low cost, and they demand little ongoing attention, since you're not tracking the fortunes of individual businesses. For someone who wants to invest without turning it into a second job, that combination is the main draw.
What are the advantages of individual shares?
Individual shares offer control and the chance to outperform. If you research a company and back it, and you're right, you capture the full upside rather than a diluted slice of it. You also avoid the small ongoing fee an ETF charges. The trade-off is that this requires genuine effort and judgement, and it concentrates your outcome on fewer bets. For investors who enjoy the analysis and accept the concentration, that control is the appeal.
What are the risks of each?
Both carry market risk, the value of either can fall. Beyond that, the risks diverge. An ETF spreads company-specific risk but still falls when the whole market falls, and by design it won't beat the market it tracks. Individual shares carry concentration risk, a single company doing badly hits you directly, and they demand time and skill to choose well. Neither approach removes risk, they simply distribute it differently.
Can you invest in both?
Yes, and plenty of investors do. A common approach is to hold broad ETFs as a diversified core, then add a smaller number of individual shares for companies you have particular conviction about. That way most of your money is spread widely, while a portion expresses your own views. Whether that suits you depends on how much time you want to spend and how much concentration you're comfortable with, which is a personal question rather than a rule.
Frequently asked questions
Are ETFs safer than shares?
A diversified ETF spreads company-specific risk across many holdings, so a single company doing badly matters less than it would if you held only that share. But ETFs still carry market risk and can fall in value, so safer is relative rather than absolute.
Can I hold both ETFs and shares?
Yes. Many investors use a mix, broad ETFs for diversified exposure and a smaller selection of individual shares for particular convictions. The right balance depends on your goals and how much attention you want to give it.
Which is better for beginners?
Many newer investors find ETFs accessible because one purchase provides broad diversification at low cost. Whether that suits you depends on your circumstances, and it's general information rather than a recommendation.
The choice is less about which is better and more about which suits how you want to invest. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a retirement planning module that can factor investments outside super into your overall position, based on your age, income, balance and goals. It helps you see how either approach fits the bigger plan.
Sources
- ASIC MoneySmart — shares and exchange traded funds — moneysmart.gov.au
- Australian Securities Exchange — ETFs and direct shares — asx.com.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.