Investing styles fall into two camps: low-cost and high-effort. Each has different supporters.
## Passive investing
– Relies on index funds and ETFs.
– Examples: Vanguard Total Stock wpp market analysis ETF (VTI), SPDR S&P 500 ETF (SPY), iShares Core MSCI EAFE ETF.
– Advantages: low fees, diversification, proven long-term performance.
– Returns equal the index.
## Active investing
– Involves selecting individual stocks or funds.
– Examples: Hedge funds buying Tesla early.
– Advantages: potential for higher returns, flexibility.
– Drawbacks: high fees, inconsistent results, risk of underperformance.
## Real-world perspective
– Even professionals struggle to beat indexes.
– Yet some active managers succeed in niches like biotech or emerging markets.
**Conclusion**
Passive investing is low-cost, simple, and effective, while active investing is those willing to take higher risks. Many combine both, holding SPY or VTI for stability.
