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Index Fund or Individual Stock: Which Is Better?
One of the first dilemmas for an investor starting in the stock market: individual stocks or an index fund? Both have their place — it depends on your risk profile and how much time you can devote.
The Logic of an Index Fund
A BIST 100 index fund (e.g. BIST 100 ETFs) provides exposure spread across 100 companies in a single purchase. The collapse of one company affects your portfolio by no more than 1%. This diversification largely eliminates risks other than systematic risk.
It carries an annual fund management fee (~0.5–1%) but its trading commission is generally lower than buying a single stock.
Individual Stock Investing
When the right stock is chosen, returns well above the index are possible. However, statistically the vast majority of active investors fail to beat the index over the long run (academic literature — Bogle, Sharpe).
Single-stock research requires time and analytical skill; the wrong stock at the wrong time leads to serious losses.
Practical Recommendation
For a beginner or someone without time: 70% of the portfolio in an index fund + 30% in a mix of 3–5 carefully selected stocks provides a balanced entry. As experience grows, the individual-stock share can preferably be adjusted.