Active vs Passive Investing
The choice between trying to beat the market and simply tracking it at low cost.
Active investing tries to outperform the market through selection and timing, usually at higher cost, while passive investing aims to match a market index cheaply. Evidence shows most active strategies underperform low-cost index funds over the long run after fees, which is why passive investing is popular in the FIRE community.
Examples
- Buying a low-cost index fund and holding it for decades is a passive approach.