While there is no one-size-fits-all strategy for all of us, passive investing is often touted as a simple and effective way to invest by buying a reputable ETF with global exposure and doing so for the long term. I discussed this, and the argument against stock picking, with Julian Ng, Chief Financial Guy of roboadvisor-hopeful Akru, which you can find linked below. However if you don’t have 20 minutes to spare right now, below are 4 reasons to consider the passive investing strategy.
Diversification – Many of us are busy, we can barely find the time for hobbies let alone researching a portfolio of stocks to buy. Buying into a reputable global ETF could allow you to minimise time on research, while giving your money simple and immediate global diversification. Paired with dollar-cost averaging, you will be able to further manage risk by diversifying your investments over time.
Simplicity – Too many choices and decisions can cause overthinking and analysis paralysis. This can keep many people from investing purely due to inertia. Reduce the friction by keeping your investing strategy simple and long-term focused by using a reputable global ETF.
Discipline – A simple passive investing strategy can also encourage discipline as you keep your investing to the selected ETF(s). This can be more efficient risk-taking (and diversification) than stock picking, which is characterised by concentrated bets, and can be nerve wrecking during increased market volatility.
Fees – Going in and out of the stock market generally incurs fees, which can eat into your returns in the long term if taken for granted.
For more on this, catch the full Ringgit & Sense podcast with Julian Ng, Chief Financial Guy of Akru, on the BFM app or Spotify
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