ETFs and stocks are among the most common ways to invest in financial markets, yet they work very differently. A stock gives you ownership in one company, while an Exchange-Traded Fund (ETF) gives you exposure to a group of assets through a single investment.
Understanding this difference matters, especially for investors using Appreciate to access US markets. More Indian investors are now looking beyond domestic options and exploring US stocks and ETFs for global exposure, diversification, and long-term growth.
In this blog, we break down the difference between ETFs and stocks, when to choose each, and how Indian investors can invest wisely in the US markets.
What is a Stock?
A stock represents ownership in a single company. When you buy a stock, you buy a small share of that business. Stock ownership means:
- You participate in the company’s growth and losses
- You may receive dividends if the company pays them
- Your returns depend on how that one company performs
Stocks operate through stock exchanges. Prices move depending on company earnings, news, demand and overall market conditions. If the business grows and investors value it higher, the stock price rises. If performance weakens, the price falls.
In simple terms, stocks give you focused exposure to one company.
What is an ETF?
An ETF, or Exchange-Traded Fund, is a single investment that holds multiple assets. These assets can include stocks, bonds, or commodities.
ETFs operate like this:
- They are listed on an exchange and trade during market hours
- You purchase and sell them just like stocks
- Each ETF follows a specific index, sector, theme, or asset type
The main benefit of ETFs is diversification. Instead of relying on one company, your money is spread across a lot of holdings inside the fund. This lowers the impact of any single company’s performance on your overall investment.
ETFs are often used to get broad market exposure with lower effort and more balance compared to picking individual stocks.
Key Differences between ETFs and Stocks
A stock gives you ownership in one company, while an ETF gives you exposure to a group of assets through a single investment. Both are traded on exchanges, but they serve different purposes depending on how much control, diversification, and risk you want in your portfolio.
| Aspect | Stocks | ETFs |
| Ownership and structure | A stock represents ownership in one company. Your returns depend entirely on that company’s performance. | An ETF represents ownership in a basket of assets such as multiple stocks, bonds, or commodities. Performance depends on the combined holdings. |
| Exposure | Focused exposure to a single business. Gains and losses can be sharp. | Broad exposure across sectors, markets, or asset types. Price movement is usually steadier. |
| Trading and transactions | Stocks are traded on stock exchanges during market hours. Prices change based on company news, earnings, and demand. | ETFs also trade on stock exchanges during market hours. Prices move based on the value of underlying assets and market demand. |
| Buying and selling process | You buy or sell individual shares of a company through market or limit orders. | You buy or sell units of an ETF the same way, but each unit represents multiple holdings. |
| Costs and fees | No ongoing fund cost. You pay brokerage and exchange-related charges on each trade. | ETFs have an expense ratio, which covers fund management costs, along with normal brokerage charges. |
| Diversification | No built-in diversification. Risk is concentrated in one company. | Built-in diversification across many assets within a single ETF. |
When to Choose an ETF Over a Stock
Choosing an ETF over a stock makes sense when you want broader exposure with lower concentration risk. ETFs are usually a good choice when:
- You want exposure to a market, sector, or theme without picking individual companies
- You are new to investing and want built-in diversification
- You want to reduce the impact of one company performing poorly
- You prefer steadier movement over sharp price swings
From a risk point of view, ETFs help spread your investment across multiple holdings. This lowers the effect of bad news or weak results from a single company. For long-term investors who want balance rather than precision, ETFs often fit better.
Where to Invest in US Stocks and ETFs from India
Indian investors can invest in US stocks and ETFs through Appreciate by following a simple process. The steps are:
- Opening a US investing account online
- Completing the KYC process and submitting all the documents
- Funding the account under the Liberalised Remittance Scheme
- Buying US-listed stocks or ETFs directly from the platform
From a legal standpoint, these investments fall under the Liberalised Remittance Scheme (LRS), which allows Indian residents to invest a maximum of USD 250,000 per financial year. All investments must be reported while filing income tax returns, and platform-level compliance is handled during account setup.
Why Choose Stocks Over ETFs
Choosing stocks over ETFs works better when you want direct exposure to specific companies and are comfortable with higher risk.
Stocks may be the right choice when:
- You have a strong conviction in a company’s business and growth potential
- You want the chance of higher returns from a single winner
- You want direct access to dividends from individual companies
Stocks offer more control but less protection. Returns depend entirely on company performance, which can lead to sharper gains or losses. For investors who research deeply and track businesses closely, stocks plan an important role in long-term wealth creation.
Start Investing in US ETF
“US ETFs (Exchange Traded Funds) offer a great opportunity for investors looking to diversify their portfolio with international exposure. With Appreciate, you can now access these ETFs easily, benefiting from the growth of US-based companies. Investing in US ETFs can be a strategic way to tap into global markets, adding stability and potential growth to your investment strategy.
Conclusion
The difference between ETFs and stocks comes down to focus versus spread. Stocks give you ownership in a single company and higher control, but they also carry higher risk. ETFs give you exposure to multiple assets through one investment, which helps manage risk and keeps returns more stable.
For Indian investors, the right choice depends on your goals. If you want simplicity, diversification, and lower dependence on one company, ETFs are often a practical starting point. If you are comfortable researching businesses and handling price swings, stocks can offer stronger long-term upside.
A balanced approach often works best. Start with clarity on your time horizon, risk comfort, and how actively you want to manage your investments. From there, choose between stocks, ETFs, or a mix of both that fits your plan.
FAQs on ETFs and Stocks
The tax implications of investing in US ETFs and stocks for Indian investors are based on capital gains, dividend income, and mandatory foreign asset reporting:
If you sell within 24 months, gains are taxed as per your income slab.
If you hold for more than 24 months, long-term capital gains are taxed at 20% with indexation.
Dividends are taxable in India as per your slab, even if tax is deducted in the US.
Yes, you can invest in both US stocks and ETFs through Appreciate. The platform allows Indian investors to open a US investing account, buy stocks and ETFs listed on US exchanges, including fractional units, and manage all holdings from one place in line with Indian regulations.
It depends on what you choose:
Stocks: Risk is tied to one company. Prices can move sharply.
ETFs: Risk is spread across multiple companies or assets.
ETFs usually show steadier movement. Stocks offer higher upside but sharper swings.
For most long-term investors, reviewing your investment portfolio once every three to six months is enough. More frequent reviews may be needed if your goals, income, or risk tolerance change. Checking too often without a reason usually leads to unnecessary decisions.
Indian investors can trade US stocks and ETFs under the Liberalised Remittance Scheme, which allows up to USD 250,000 per financial year. Investments are permitted in listed securities, subject to KYC and documentation. There are no specific restrictions on trading US stocks or ETFs available on approved platforms.
Yes, you can trade ETFs the same way as stocks. ETFs are listed on stock exchanges, trade during market hours, and allow buy and sell orders at live prices, just like individual shares.
A Demat account is required to buy Indian stocks and ETFs, but it is not needed for US stocks and US ETFs. When investing in US markets, holdings are maintained through a US brokerage account rather than an Indian Demat structure.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.
