Passive investing is best for most people because the funds are cheaper and there are fewer fees.
Perhaps the signature passive investment is the index fund, which buys a basket of securities meant to represent an entire market.
For example, if one slice of your investments had great gains and now constitutes a bigger share of the pie, you might consider selling off some of the gains and investing in another slice to regain balance.
Sticking to your plan also will keep you from chasing performance.
We believe everyone should be able to make financial decisions with confidence. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.
And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free. Our partners cannot pay us to guarantee favorable reviews of their products or services. " At Nerd Wallet, we strive to help you make financial decisions with confidence. Mutual funds are the big-box stores of the investing world, buying in bulk to pass along a wide range of products at affordable prices.And since there’s no real management going on, its fees are lower than for an actively managed fund.» Want to know about passive investing involving robo-advisors?Learn more about this automated way to manage your portfolio When considering how much to invest, remember that patience pays.A good rule of thumb is you should feel comfortable leaving the money untouched for at least five years to ride out any market downturns.These fees aren’t always easy to identify upfront, but it’s well worth the effort to understand because they can eat into your returns over time.Commissions aren’t a thing with mutual funds, but there still can be transaction fees for buying or selling a fund.» Examine the cost: Once you determine the mutual funds you want to buy, you’ll want to think about how to manage your investment.One smart move would be to rebalance your portfolio once a year, with the goal of keeping it in line with your diversification plan.These funds are more expensive because of the human touch involved.A more hands-off approach called passive investing is rising in popularity, thanks in large part to the ease of the process and the results it delivers.