Definition
Passive investing aims to match market returns by tracking an index rather than selecting individual securities. Benefits include lower costs, greater tax efficiency, broad diversification, and consistent relative performance. The growth of passive investing through index funds and ETFs has transformed the investment industry.
Example
Instead of picking stocks, a passive investor buys a total market ETF, accepting market returns with minimal fees.
FAQ
What is Passive Investing?
Investment strategy that tracks a market index rather than trying to beat it.
Why is Passive Investing important?
Passive Investing helps investors evaluate fund types and make more informed decisions.
Related Terms
Index Fund
A fund designed to track the performance of a specific market index.
Active Management
Investment approach where managers select securities to beat a benchmark.
Expense Ratio
The annual fee charged by a fund expressed as a percentage of assets.
Buy and Hold
A long-term strategy of purchasing securities and holding them regardless of fluctuations.