Passive Investing
Passive investing is a long-term strategy of buying and holding broad market investments, typically index funds, instead of trying to pick winners or time the market.
Passive investors accept the market's return rather than trying to beat it. They usually build a diversified portfolio of low-cost index funds or ETFs, set an asset allocation that fits their goals, and trade only occasionally, mostly to add money or rebalance.
The approach rests on two observations: markets price in much of the available information quickly, and costs reliably reduce returns. Lower fees, fewer trades and fewer taxable events can give passive portfolios an edge over many active strategies over long horizons.
Passive does not mean risk-free. A passive portfolio will fall during a bear market, and investors need the discipline to stay invested through declines. It also does not mean no decisions at all: choosing the mix of stocks and bonds is itself an active choice.
Example: an investor who buys a total US stock market fund and a total bond market fund each month, and rebalances once a year, is following a passive strategy.