What is passive investing. Tells personal brokerPersonal brokers help you figure it out, how to form a long-term portfolio and not be distracted by news noise. You can read the previous articles on our channel. Today we'll talk about passive investing.
Wealth Management ConsultantWhat is passive investing. Tells a personal broker
All strategies in the stock market can be divided into speculation, active and passive investments. Most often, private investors try different approaches, until decided, which strategy brings the best result. I will tell, how a passive investor works.
Passive investor strategy - "buy and hold". This means, that he is not trying to overtake the market, but counts on the growth of quotations in the future. At the same time, a passive investor invests money for years or even decades. He performs few transactions and pays small commissions to the broker.
The main instruments of a passive investor are ETF. These are exchange-traded funds, including index. There are a number of benefits to investing in funds:
1. You can not study the economic models of companies and not dive into fundamental analysis.
2. You can not follow the daily market situation.
3. Briefcase, stock of funds, diversified by default.
4. Reduced Risk.
Since a passive investor does not have to monitor news and charts or worry about price fluctuations, he rarely makes decisions. Mostly, at the time of purchase.
The most striking example of successful passive investing is the famous bet of Warren Buffett, which he entered into with the Protégé Partners in December 2007 G. Buffett argued, which will put on the index S&P 500 and beat the opponent, put on active management in five different funds. The bet was made for ten years, and Buffett won: by the end 2017 G. index fund S&P 500 grew up on 125%, and Protégé Partners during this time managed to earn about 88%, and this was the best result of the five selected funds.
Passive investing suits those, who sets long-term financial goals and is not ready to spend a lot of time on asset management. ETFs on stock and bond indices may show good results in 5-10 years. At the same time, you do not have to track the financial performance of companies and select stocks individually..
The next conversation is about setting financial goals..
If you have a portfolio of securities with a value of 3 RUB million, we recommend conducting an audit - it's free. You will receive a professional opinion from a personal broker, based on analytics from Argus Research and BCS Global Markets.
