This approach is called <u>passive investment</u>
Passive investment refers to an investment strategy used by investors to increase their returns by selling and buying. Investors uses this investment strategy to prevent some fees and cut out limited performance that may likely accompany regular trading.
<h2>Further Explanation</h2>
Most investors used this strategy to have more returns which also help them to build wealth gradually. Passive investing is also called a buy and hold strategy. In passive investing, an investor buys security and hold to it for a longer-term.
Passive investors don’t look forward to profiting from short market fluctuation rather investors that used this strategy only have interest in the returns the markets bring in the long run.
Passive investors understand the market nitty-gritty, they also believe it is almost impossible to out-think the market, hence the reason they always to try to march market performance.
There are several benefits investors derived from using this investment strategy.
Some of these benefits include:
<u>Transparency:</u> investors do know the assets in an index fund
<u>Extreme low fees:</u> monitoring is not necessary simply because no one is picking stocks
<u>Tax efficiency:</u> this strategy does not lead to a yearly tax of massive capital gains since passive investors only buy and hold.
<u>Simplicity:</u> to own an index is very easy to implement and understand when compared to a dynamic strategy that involves regular adjustment and research.
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KEYWORDS:
- mutual fund
- passive investing
- vanguard index 500
- market
- index
