What Is Passive Investing?

Passive investing is an investment strategy that relies on maximizing returns on stocks by reducing buying and selling and holding stocks over a longer term. It is referred to as a ‘buy and hold’ strategy.

Unlike active trading, passive investors do not make profits by taking advantage of short term fluctuations in stock prices or market timing their purchases. Passive methods of investment avoid the fees that come with frequent trading and rather look to buy securities in the longer term over which, generally, their prices rise along with the market as a whole. The overarching philosophy of passive investment is that the market provides positive returns over a longer time period and an investor should pick a diverse portfolio of solid stocks and keep them over the longer term rather than attempting to out-think the market over the shorter term.