Passive Investing

Written By:
Paul Tracy
Updated August 5, 2020

What is Passive Investing?

Passive investing is a strategy focused on achieving long-term appreciation of portfolio values with limited day-to-day management of the portfolio itself.

How Does Passive Investing Work?

A passive investor is one who limits on-going buying and selling activities.  A passive investor purchases securities, builds a portfolio, and generally holds the portfolio for the long term.

Passive investors usually do not actively buy and sell as prices change in the market.  The general investment philosophy of passive investors is that their portfolios will grow with the long-term growth of the market.

Why Does Passive Investing Matter?

Passive investors rely on slow, steady growth in the market. The passive investor builds his portfolio based on an allocation of assets to match his tolerance for risk. After selecting investments for his portfolio, the passive investor will buy and then hold onto his portfolio for the long term.