How finance folk use it
Passive management is an investing strategy in which you put your money in one or more investment products and hold on instead of constantly trading them.
By doing this, you expect that your investment’s value will rise over time, or will remain at that level while allowing you to profit through interest payments or dividends. In the best-case scenario, the value will go up while you enjoy the payments or dividends.
Is it good or bad?
Historically, passive management has been proven to have a good possibility of success.
Compared to active management, it takes less effort and will have you paying less in fees (since you’ll be trading less). You also won’t need to be as attentive to the market, or as knowledgeable about the nuances of investing.
However, still comparing it to active management, passive investing also has lower potential for returns. This is because you’ll be much less reactive to market movements.
What it means for you
Passive management is a strategy that you can employ for your portfolio. If you have more than one investment product, you can consider combining it with an active strategy to reap the benefits.
Remember though that passive investing doesn’t mean you won’t need to look at and maybe tweak your portfolio periodically. This step must be done for you to have a good investing experience.
