Comparing Investing Styles Let's compare a couple of the most common investing styles: • Active versus passive investing: The goal of active investing is to "beat the index" by actively managing the investment portfolio. Passive investing, on the other hand, advocates a passive approach, such as buying an index fund, in tacit recognition of the fact that it is difficult to beat the market consistently. While there are pros and cons to both approaches, in reality, few fund managers beat their benchmarks consistently enough to justify the higher costs of active management. • Growth versus value: Growth investors prefer to invest in high-growth companies, which typically have higher valuation ratios such as Price-Earnings (P/E) than value companies. Value investors look for companies that have significantly lower PE's and higher dividend yields than growth companies because they may be out of favor with investors, either temporarily or for a prolonged period of time. The question of "how to invest" boils down to whether you are a Do-It-Yourself (DIY) kind of investor or would prefer to have your money managed by a professional. Many investors who prefer to manage their money themselves have accounts at discount or online brokerages because of their low commissions and the ease of executing trades on their platforms. DIY investing is sometimes called self-directed investing, and requires a fair amount of education, skill, time commitment, and the ability to control one's emotions. If these attributes do not describe you well, it may be smarter to let a professional help How to Invest Do-It-Yourself Investing
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