Why use exchange traded funds (ETFs)?

"Using exchange traded funds (ETFs) in your investment portfolio, in addition to common stocks, helps an investor cover the handicap, or loss of risk-adjusted return, from investing in unprofitable stocks."
Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.

When we add ETFs that cover stocks, bonds, the US Dollar and commodities to our run, it covers the handicap.
Investing only in companies that make a profit increases your expected returns and reduces your historical risk?

Then why do investors also invest in companies that do not make a profit? We think it is to capture the potential of large and significant gains when companies complete a turnaround, innovate, or grow into their cost structures and generate profit and cash flow.

To test our hypothesis that ETFs could help the US stock market investor to improve risk-adjusted returns by diversifying outside of just common stocks, we added a few ETFs to our Chicago Quantum Net Score analysis. The results produced the same edge on January 20, 2023.

For profitable stocks, we found a 7-stock portfolio, equally held. For both profitable and unprofitable stocks, we had a 9-stock portfolio, equally held, to gain the same edge over holding stocks evenly. On Monday, January 23, 2023, the market lept higher and both of these portfolios had substantial gains on the day. The Chicago Quantum Net Score Up or Long model had a very good day.

Another aspect to investing is to minimize or manage the cost of maintaining an active portfolio. The difference between the two runs was only two stocks, which is an almost immaterial change in the cost of maintaining the portfolio. In conclusion, ETFs really do help an individual investor.

ETFs can help investors focused on balancing, or offsetting, historical risk and expected return.

Buy an analysis and see for yourself

Here are the ETFs we are adding to our "all stock" run as of January 20, 2023.

    "def addETFs(list_of_tickers):\n",
    "    list_of_tickers.append('SPY')\n",
    "    list_of_tickers.append('IWM')\n",
    "    list_of_tickers.append('QQQ')\n",
    "    list_of_tickers.append('USO')\n",
    "    list_of_tickers.append('AAAU')\n",
    "    list_of_tickers.append('UUP')\n",
    "    list_of_tickers.append('SLV')\n",
    "    list_of_tickers.append('CPER')\n",
    "    list_of_tickers.append('UVXY')\n",
    "    list_of_tickers.append('VIXY')\n",
    "    list_of_tickers.append('SQQQ')\n",
    "    list_of_tickers.append('TNA')\n",
    "    list_of_tickers.append('TZA')\n",
    "    list_of_tickers.append('TLT')\n",
    "    list_of_tickers.append('SHY')\n",
    "    return list_of_tickers\n",

As a follow-up, we removed all ETFs from our stock run on February 16, 2023 to focus on US common stocks. The edge from that run was tiny compared to what it normally is with ETFs. We removed them from our run as it was providing an 'apples vs. oranges' analysis. We are either analyzing multiple-stock investments, or individual US common stocks.