What Is Passive Investing?
An investment strategy that tracks a market index rather than trying to beat it through active stock-picking.
The Full Definition
Passive investing means buying and holding a fund that tracks a market index — like the S&P 500 or the total stock market — rather than trying to pick individual winners or time the market. The strategy accepts the market's average return in exchange for minimal fees, minimal trading, and minimal effort. Because index funds don't need analysts or frequent trading, their expense ratios run a fraction of what active funds charge, and decades of data show most active managers fail to beat their passive benchmark after fees.
Real-World Example
An investor who buys VTI and never trades it again is investing passively — they own the entire US stock market and simply let it compound, without ever trying to guess which individual companies will outperform.