Passive Investing
InvestingGlossary term
Definition
An investment strategy that aims to match market returns rather than beat them, typically through index funds and ETFs. Passive investing relies on broad diversification and low costs, and research shows it outperforms most active managers over long periods.
Related terms
- Index FundA type of mutual fund or ETF designed to track the performance of a specific market index, like the S&P 500. Known for low fees and passive management strategy.
- Active ManagementAn investment approach where fund managers make deliberate buying and selling decisions to outperform a benchmark index. Active funds charge higher fees than passive funds, and studies show the majority of active managers underperform their benchmarks over time.
- Expense RatioThe annual fee that all funds or ETFs charge their shareholders, expressed as a percentage of assets. Lower expense ratios mean more of your money is invested rather than going to fees.
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