In the investment world, there are two types of investment, that is active investment and passive investment. These two types are distinguished by the targets of each investor, their characteristics, and investment methods that are their preferences.
Both active and passive investment can actually be profitable. It’s just the form of profit and duration makes the two have different orientations.
What is Passive Investing?
Passive Investing is an investment strategy that targets greater profits in the long run. According to Investopedia, this method seeks to avoid the fees and limited performance that may occur with frequent trading. Thus, passive investors do not specifically target profits that are made quickly.
Passive investing also does not specifically look forward to “getting rich with just one investment”. In contrast to passive investing, an investor tends to choose to build his wealth slowly over time.
If you are a passive investor, then you are more likely to invest in the long term. Passive investors often limit the number of funds that they must spent in an investment portfolio. Thus, it will be more efficient and more effective when investing.
For a passive investor, they need a buy and hold mentality as part of an investment strategy. In the case of stock investments, for example, it means passive investors must be able to resist the temptation to react or anticipate developments in the stock market.
When a passive investor has a relatively large share of ownership, the investor gets a profit only by “participating in the trajectory” of the company’s profits from time to time.
Successful passive investors tend to keep an eye on profits and ignore short-term declines, even a sharp slump.
Read more: Diversification, a Concept to Secure Your Investment
