Definition of ‘Passive Investing’–An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance.
- Passive investing like everything else in life comes with pros and cons. I believe that passive investing in the stock market is a great way to create wealth. However it is not for everyone and similar to real estate– timing and location are everything.
- If you are just starting out your productive years (20′s) passive investing is a must, you can do that with IRA’S and 401k’s. You really don’t have to concern yourself too much with timing due to the fact that you have many years ahead of you to make up for any losses and your ability of average in will help tremendously.
- If you are investing for your child passive investing is probably the best thing you can do. Again you really don’t have to concern yourself too much with market timing etc..due to the fact that your child will have many years to make up losses and you and him/her will also have the ability to average in.
- The key to passive investing is–having the ability to average in, specifically when we have huge corrections. Having enough time before you retire is all also a huge key to passive investing.
- Passive investing might not be right for you if you don’t have the ability to average in and you don’t have much time until you retire.
- Passive investing might not be right for you if you cannot sit through draw-downs, we have had a couple of 50% draw-downs in the last 14 years and if you don’t have the time to wait it out nor the ability to average in then you will be in for a rude awakening.
- If you don’t have the time nor the ability to average in passive investing might work for you if you START passive investing after a “the world is coming to an end” correction. This is a lot easier said than done because when you are in the middle of the battle and all you read and see is how the world is coming to an end it is really hard to hold your nose and dive in–think of 2000, 2008-2009, 2011.
- Once you are bit more sophisticated can you do passive investing with some market timing? YES. All you need to know about that you can find on google.
- Can you diversify yourself in a passive investing account to minimize draw-downs? YES. But at times everything goes down and your small slice of whatever did not get hit is usually not enough to make up for the rest of the investments that took a hit. This is when the ability to average in and time benefits you.
Zor Capital LLC is a New York based investment management firm, founded in 2011. Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts. Managed Assets
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.