Investor Passive Investment Strategy
As we mature and gain responsibility, most people graduate from pre-investor status and enter the investment world through the window of passive investing. It’s the most common starting point on the road to financial GSBM.
Most financial institutions, educational services, and web sites support passive investing as the proven, accepted solution. Most of what you can learn from the information available in your local bookstore or on the internet is the conventional wisdom of passive investment strategies.
Passive investing is where the retail world of investing lives. While there are no hard statistics to support my claim, I believe well over 90% of all investors fall into the passive investor category.
The passive investor type usually employs all the basics of sound personal financial planning: own your own home, fund tax deferred retirement plans, asset allocation, and save at least 10% of earnings.
If you follow these foundational principles and begin early enough in life, then passive investing is likely all you’ll ever need to attain financial security.
Passive investment strategy is good for people with busy lives, families, jobs, outside interests, or entrepreneurs building businesses.
Let’s face it: most people’s lives are already full, leaving little time for developing investment skills. It’s difficult to make investing a top priority despite its financial importance.
The defining characteristic of passive investment strategies are their simplicity. They require less knowledge and skill making them accessible to the general populace.
“Buy and hold” with mutual funds or stocks, fixed asset allocation, averaging down, and buying real estate at retail prices are all examples of passive investment strategies.
There’s nothing wrong with any of these strategies, but they can have negative consequences.
Sure, it’s possible to become acceptably wealthy, but the downside is it usually requires a working lifetime combined with discipline and regular savings contributions to achieve financial independence using the passive investment style. The one exception is extreme frugality because of the high savings rates and low spending rates that accelerate the timeline.