Hands-Off Investor

Dictionary Says

Definition of 'Hands-Off Investor'


An investor who prefers to set an investment portfolio and make only minor changes for a long period of time. Many hands-off investors use index funds or target date funds which make only small and slow changes to their holdings, and therefore do not require much monitoring.

Investopedia Says

Investopedia explains 'Hands-Off Investor'


A hands-off investment strategy is well-suited to many retail investors who may not have the time needed to routinely monitor and research their investments. Hands-on, active management requires investors to continuously keep up-to-date on the positions that they hold. This often requires several hours of research per week. Active managers believe that by doing this work, they can earn higher-than-average returns on their investments.


A hands-off strategy is not necessarily underperforming. Many investors believe in an indexing approach, which posits that sticking with a well-diversified portfolio over the long term is the key to wealth. Since index funds often have very low expense ratios, hands-off investors often enjoy a built-in advantage over active traders who pay more in trading commissions, lose out to the bid-ask spread and incur the higher tax rates on short-term capital gains and nonqualified dividends.



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