Why Passive Wealth Management is the Best Strategy for Investing

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Passive wealth management (also referred to as passive investment) is the strategy for investing that follows a market-weighted portfolio or index. The one that is most popular is tocopy the performance of a quantified index by buying an index fund. Then by tracking an index, an investment portfolio usually gets good:

Diversification

Low turnover (keeps down internal transaction costs)

Low management fees

It is because of these lower fees that an investor in such a fund will usually have returns that are higher than a comparable fund with similar investments but higher fees for management and/or transaction costs for turnover.

Most common

 Currently passive wealth management is common more on the equity market, and that is where index funds follow a stock market index but it is becoming common in other types of investment, such as:

Commodities

Bonds

Hedge funds

 Largest funds

 One of the larger“equity mutual funds”, is the Vanguard 500, and is managed passively. There are 2 firms that have the most money under passive management and they are:

State Street

BlackRock

Financial advisers

 Most fund advisors have confirmed that it is essentially a waste of time, money, and energy to ever try to beat the market.

Advice

 These advisors approach starts with the idea that stock-picking is basically pointless. They advise that success comes from keeping fees low and being tax efficient but also involved in variation; a focus on smaller stocks as opposed to larger stocks and value over growth. What does all this mean – passive management in the long run is the better way to manage any wealth or money that you have.

Advice to millennials

 The aim of some advisors is to allow millennials to take charge of their financial future by training them along the way towards financial freedom by not taking large risks but to passively manage their money.

Advice to retirees

 If you are retired and have a wealth of money that you don’t need to use at this time, put it into passive management until it is needed. By the time you need this money it will have accrued a nice sum for you.