Passive investing and active investing

Passive investing means buying and holding a broad index fund or ETF that simply tracks the market, aiming to match the market's return rather than beat it. Active investing means picking individual stocks or funds in an attempt to outperform the market, whether done by an individual investor or a professional fund manager.

Passive investing typically comes with lower fees, since there is no manager to pay for research and stock picking. Active investing offers the possibility of beating the market, but decades of data show most active managers underperform a simple low-cost index fund over long periods after fees.