Buying individual stocks is investing. It is what EFTs and mutual funds do. Buying individual stocks may introduce diversification risk, but it remains investing. And with enough stocks, you can reduce that diversification risk. Back when odd lots carried higher commissions, and when fractional shares could only be sold and not bought, funds were the way to go, but today, the only reason to go funds is to let someone else make the buy/sell decisions. You buy the fund, the manager buys the.... individual stock. Me doing it vs him doing it does not change it from investing to gambling.
Investing in an index fund will get you diversification, but think about what you are buying. Standard & Poors decides what companies get included in their S&P 500. Last week, Moderna got added. That means company number 500 got squeezed out to be number 501, and every S&P 500 index fund is dumping that stock for no good reason. Those same funds are buying Moderna, as though it will be a lead vaccine maker for next year's once a century pandemic. This is irrespective as to whether this is a good point to enter into the trades. They funds are just jumping off the same bridge because Standard & Poors did. For this you pay a fee.
I have a different performance time horizon than Standard & Poors. For example, I am willing to hold oil stocks, as I am confident that oil, like tobacco, will be profitable for a long time. "Today, oil and gas companies constitute just 2.3 percent of the S&P 500, down from more than 15 percent in 2008." Says the Google. Standard & Poors says that one-third of the historical gains of the S&P 500 has been dividend yield as opposed to appreciation. This shift out of oil has paralleled a decline in S&P 500 dividend yield. Had I chosen index funds instead of individual stocks, I would have chosen to lower my dividend yield, which, you know, can be tax free.
Do I buy funds? Absolutely! They are a great way to get specific investment exposure. GLD gets exposure to gold. GSY to ultra short term bond funds. KBA to China. INDA to India. XT to exponential technologies. But for the majority of my investing I pick a distressed entry point, buy and hold, and don't get swayed by the trendiness of a TSLA or Moderna. And if I didn't like doing this stuff—like Warren Buffett's wife—I would go all index funds. It's not the wrong thing to do, but don't assume the fund manager does the correct thing. All he does is jump because everyone else did.