Passive investing is a type of a buy-and-hold strategy for long-term investment horizons, which involves close to zero trading in the market. The asset of choice for passive investors is usually a basket of ETFs that follow a broad market index or indexes.
For example, many passive investors choose to include an ETF tracking the performance of the S&P500 in their portfolio.
Reasons for passive investing can be that it's less complex, meaning you're less likely to make bad timing decisions or select the wrong assets. Of course it also consumes less time than trading on a regular basis.
Often, the case for passive investing is best made by active investors who try to beat the market and fail.
What else do you need to know about ETFs?
Want to learn more before deciding which is the best ETF for you? Check out these articles to deepen your knowledge:
- What is an ETF?
- What is the difference between mutual funds and ETFs?
- What is the difference between US and EU ETFs?
- What does an ETF portfolio mean?
- What is an ETF expense ratio?
- How liquid are ETFs?
- How to buy Vanguard ETFs?
- How to buy iShares ETFs?
- What are sector ETFs?
- Are US ETFs only available for US residents?
How can I buy ETFs?
For more info, click here to learn how to buy ETFs online.