Question

With the advent of Index Funds as well as ETNs/EFNs, why would investors continue to hold investments in individual securities (stocks, bonds, etc.)? Does your answer change given the performance of ETNs/EFNs during the upheaval of financial markets due to the pandemic?

Answer 1

Investors prefer to hold share and stocks and bonds because they believe in active management of their portfolio while index fund is a passive form of investment which just require investment into the fun and it will replicate the index proportion and index return.

holding shares or bonds offers with higher risks and there is also a higher probability of making higher return so investors who are risk loving in nature always decides to opt for management of individual stocks by their own rather than opting for an exchange traded fund or index fund.

No, my decision would not change because those investors who love risk taking, always know that at the time of the high volatility, their portfolio will see higher drawdowns because they are exposed to very high beta stocks, and while index is just replication of individual stocks who are diversified in such a way that there risk and return are minimised so there is no possibility of making phenomenal returns for them through index fund or exchange traded fund.