Passive investing is an investment strategy in which, instead of trying to “beat the market,” an investor attempts to mimic the return of a stock or bond market index – for example the S&P 500 index.
It is called passive investing because portfolio managers don’t make decisions about which securities to buy and sell; they simply buy the same securities which make up their target index. The strategy attempts to improve long-term returns by minimizing buying and selling transactions, reducing the negative impact transactions can have on performance.
The passive investing approach, unlike active investing, is not aimed at making short-term trading gains, but instead at building wealth slowly and steadily over the long run. The strategy avoids trying to “time the market” in favor of a buy-and-hold approach that attempts to capitalize on the tendency of equity markets to provide positive returns over long-term time periods.
SmartWealth uses a passive investing strategy to help investors build wealth over time. We use ETFs to enable investors to build portfolios which allow them to participate in the returns of markets around the world in accordance with their investment goals and investor profile.