I recommend buying the market. This article answers these questions with the most basic explanation possible.

Investing in the market means you have a whole basket of eggs — er, stocks.

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Think of investing in the market as purchasing a whole basket of stocks all mixed together. There are other definitions, but this is the simplest. Buying "the market" means you own the whole basket of stocks, and buying this basket has given a return of 9. An ETF is essentially a basket of stocks that you can buy just like any individual stock.

Many also suggest buying index funds which are very closely related — but I recommend ETFs for several reasons — primarily because they are cheaper. There are hundreds of ETFs to choose from and you can buy ETFs for bonds, foreign stocks, and other asset classes , but some of the most recommended ETFs for US stocks are VTI, VOO, VTV, and VOE all four are Vanguard funds. Let your investments do the work for you. Think of it this way.

There are two types of investors: In other words, they follow steps one and two. Active investors try to beat the market.

Any time you choose an individual stock or most mutual funds, you are entering the "active" arena — an arena filled with professional money managers who spend their entire day studying the stocks you are just casually buying. The problem with trying to beat the market is that it is a zero-sum game. Meaning, if you are going to win, someone else must lose.

People who sell no longer view their stock as an investment worth holding, so they choose to sell it, and lucky for them, there are many "know-nothing" investors willing to buy it.

Sometimes purchasing individual stocks pays off "but I bought the Tesla IPO and I made a killing! For the average "know-nothing" investor, individual stocks, especially IPOs, are a losing game.

Turns out, the other "active" investors are pretty good. When passive investors try to go active, they commonly buy high and sell low. This is one of the great investing paradoxes. Buffett essentially put his money on the passive investor to beat the active investor, and with four years remaining on a year bet, he is in very good shape.

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The conversation usually goes as follows: Any stocks you recommend? What does that mean? Invest in the market — not individual stocks. The best way to buy 'the market' is through an ETF.

Resist the urge to be an 'active' investor. Sounds like solid advice to me. Even The Smartest Investors Make This Common Mistake. Follow Smart Investor and never miss an update!

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