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Glossary entry · Trade-offs
Passive investing
Definition
A philosophy of investing that accepts the market's return rather than trying to beat it. Done by buying broad index funds and holding them. The opposite is "active investing" (picking individual stocks or timing the market). Decades of data show passive beats active for the vast majority of investors over time.
Example
Buying a global stock ETF every month and never selling is the simplest passive strategy.
Related
Trade-offs
Risk
The chance that an investment loses value — and how much it could lose.
Read →Volatility
How wildly an investment's price moves up and down. High volatility = bigger swings.
Read →Diversification
Spreading money across many different things so no single one can sink you.
Read →Bull & bear market
Long stretches of rising prices (bull) or falling prices (bear). Both end, eventually.
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