What is Passive investing?
Passive investing means holding a fund that copies an index instead of trying to pick the winners inside it. The fund buys what the index holds, in roughly the same proportions, and changes only when the index changes. Because there is little research and little trading, costs tend to be low.
Why Passive investing matters
It is the approach behind most index funds, and its main appeal is that you keep more of the market's return after costs.
Related terms
Lessons that use this term
- Index funds explained: what they are and how they work
- What is an index (S&P 500, Nasdaq, Dow explained)
- Investment fees: expense ratios, MERs and what they cost you