Understanding Passive Investing

​Passive investing seeks to maximize returns by minimizing the expenses and costs associated with buying and selling assets and securities. Passive investors track a specific index, commodity, or asset and target more specific countries, sectors, industries, or sub-industries.

In many cases, passive funds provide a convenient and affordable way of accessing cumbersome and expensive assets such as gold. They can also prove reliable when investing in a competitive industry such as technology, whose environment is constantly changing. For instance, cybersecurity rapidly evolves to create new technologies to combat emerging security threats effectively.

Moreover, passive investors pursue long-term investments and seek to limit transactions within their portfolios. This strategy requires a buy-and-hold mentality, where investors choose assets and securities and resist the urge to react to or anticipate the market’s next move. As a result, the buy-and-hold strategy associated with passive investing has tax-efficient benefits, as it lowers massive capital gains tax for a year.

David D'Addario, New Day Aluminum LLC

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