the choice for mutual funds vs direct investing has changed a lot in recent years. Not too long ago it was expensive to buy stock in lots of less than 100 shares, and since you need to own maybe a dozen or maybe even 20 (depending on your taste) individual stocks to meet your diversification tolerance, it was less expensive for smaller investors to use mutual funds even if they had the inclination to do their own stock picking. Today, stock purchase commissions are tiny and odd lot penalties are a thing of the past, so the value of mutual funds for 'active' small investors is much smaller than it used to be. Now in theory, if you don't want to do a lot of research, it should be easier to find a mutual fund that matches your objectives and performs to your demands than to pick individual stocks, but again, the context has changed a lot. When I started investing there were a lot fewer reasonable mutual funds to choose from than there were stocks. Today I'd wager there are more mutual funds and ETFs to research than there are stocks to pick so the question becomes - why bother with the middle man? I wouldn't tell anyone to avoid ETFs or mutual funds, as long as their charges are low, they are fine. I would just say the small investor "needs" them less than they used to. Or at least the amount of money you are managing before being comfortable with a transition to individual stock picking is much lower.