Passive Investing


DEFINITION of 'Passive Investing'

An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance.

BREAKING DOWN 'Passive Investing'

Also known as a buy-and-hold or couch potato strategy, passive investing requires good initial research, patience and a well diversified portfolio.

Unlike active investors, passive investors buy a security and typically don't actively attempt to profit from short-term price fluctuations. Passive investors instead rely on their belief that in the long term the investment will be profitable.

  1. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  2. Passive Management

    A style of management associated with mutual and exchange-traded ...
  3. Index Roll

    A passive index investing strategy that is established by using ...
  4. Active Risk

    A type of risk that a fund or managed portfolio creates as it ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments ...
  6. Buy And Hold

    A passive investment strategy in which an investor buys stocks ...
Related Articles
  1. Mutual Funds & ETFs

    Top 4 European Stock Mutual Funds

    Learn about four of the largest and most popular European stock mutual funds in the market, including options for active and passive investors.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares US Basic Materials

    Learn about the iShares US Basic Materials exchange-traded fund, which invests in the equities of chemicals, metals and industrial gas companies.
  3. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares S&P Mid-Cap 400 Growth

    Learn about the iShares S&P Mid-Cap 400 Growth exchange-traded fund, which invests in U.S. equities of mid-cap companies that show above-average growth rates.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares US Medical Devices

    Learn about the iShares U.S. Medical Devices exchange-traded fund, its characteristics, suitability and recommendations for investors.
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares Dynamic Pharmaceuticals

    Learn about the PowerShares Dynamic Pharmaceuticals exchange-traded fund, which specializes on investing in pharmaceutical companies.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares NASDAQ Biotechnology

    Learn about the iShares Nasdaq Biotechnology exchange-traded fund, which offers one of the most diversified ways of investing in the biotechnology sector.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares FTSE/Xinhua China 25

    Learn about iShares FTSE/Xinhua China 25 and its asset allocation and how investing in this fund comes with heightened risks of emerging market risk.
  9. Mutual Funds & ETFs

    ETF Analysis: Market Vectors Russia

    Learn about Market Vectors Russia ETF, its top holdings, as well as cyclical and political risks associated with investing in the Russian market.
  10. Entrepreneurship

    7 Steps To A Successful Investment Journey

    Before you start investing, educate yourself on financial ideas and develop a strategy that agrees with your personality.
  1. What is the difference between a smart beta fund and an index fund?

    An index fund often uses the market capitalization of component companies as the basis for constructing the index. In contrast, ... Read Full Answer >>
  2. Is the drugs sector better suited for active or passive investment?

    Active management and passive management represent two vastly different approaches to investing. Active investors keep their ... Read Full Answer >>
  3. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  4. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  5. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  6. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!