Hands-Off Investor

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  2. Index Investing

    A form of passive investing that aims to generate the same rate ...
  3. Holdings

    The contents of an investment portfolio held by an individual ...
  4. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  5. Pooled Funds

    Funds from many individual investors that are aggregated for ...
  6. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
Related Articles
  1. Retirement

    An Introduction To Target Date Funds

    Target date mutual funds can be an alternative to bonds and CDs for investors who do not wish to actively manage their savings. The reason: These financial products periodically reallocate fund ...
  2. Financial Advisor

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
  3. ETFs & Mutual Funds

    5 Reasons To Avoid Index Funds

    Indexes are a hands-off way for investors to access the markets, but in some cases, nothing beats active investing.
  4. ETFs & Mutual Funds

    The Lowdown On Index Funds

    If you can't beat the market, why not join it? Read on to go over your options.
  5. Markets

    Pick A Retirement Date: Target-Date Funds Will Do The Rest

    If stock picking makes your palms sweat and asset-allocation strategies make your head spin, these mutual funds can help.
  6. Markets

    4 Reasons Why Fund Managers Prefer Individual Stocks (BRK-A, VOO)

    Learn about some of the reasons why fund managers prefer trading in individual stocks over index funds, despite their overall cost savings.
  7. ETFs & Mutual Funds

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  8. Managing Wealth

    Portfolio Growth Strategies

    There are many ways to grow a portfolio, and the best approach for a given investor will depend upon various factors.
  9. Financial Advisor

    Index or Target Dates in 401(k)s: Which is Better? (VFINX, FUSEX)

    A common question is whether or not plan participants should choose index or target date funds in a 401(k). The answer depends on different scenarios.
  10. Investing

    4 Best Passive Income Investments

    Generating income from passive investments begins with knowing which ones are the best fit for your portfolio.
RELATED FAQS
  1. Why do index funds tend to have low expense ratios?

    Understand what an index fund is and why the nature of index funds causes them to have lower expense ratios than more actively ... Read Answer >>
  2. Are target-date funds (TDFs) actively managed?

    Learn how target date funds (TDFs) can be actively managed or go with a more of a hands-off approach featuring passively ... Read Answer >>
  3. How does a beginner investor seek and evaluate markets and companies worth investing ...

    I'm a beginning investor. I'm struggling in learning how to research markets and companies to invest in. What are ... Read Answer >>
  4. Are target-date funds a good investment?

    Discover why target-date funds (TDFs) are a smart choice for many investors looking for a hands-off approach to long-term ... Read Answer >>
  5. What's the difference between an index fund and an actively managed fund?

    Learn the difference between actively-managed funds and index funds. Explore the risks and benefits associated with each ... Read Answer >>
  6. What does the end of the quarter mean for portfolio management?

    Take a deeper look at why the end of a financial quarter, and all of its accompanying reports, is a significant event for ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center