Financial Blog

Investing can feel overwhelming, especially when markets are unpredictable. Passive investing gives you a more relaxed way to grow your money by focusing on long-term strategies instead of chasing short-term gains.

Instead of chasing high-risk opportunities and constantly trying to beat the market to earn from investing, passive investing gives you the option to build wealth gradually by buying and holding securities for the long term.

Let’s look at the goals of passive investing, why it works, and how you can get started.

What is the goal of passive investing?

Goal #1: Minimize the impact of market volatility

Markets naturally go up and down in response to economic news, events, and investor behavior. This can be stressful, especially if you feel the need to reach to every change. Fortunately, one of the goals of passive investing is to let you grow your money without constantly watching the market with a buy-and-hold approach. Not only does this benefit you from long-term trends but also prevents you from engaging in emotional investing that leads to buying of overvalued stocks that eventually crash, selling during downturns, and overtrading.

Goal #2: Maximize your time efficiency

Passive investing is designed to work in the background. Unlike active investing, where you constantly buy, sell, and track market news, passive investing requires less daily attention. 

As a passive investor, you will not need to monitor stock prices daily or follow every shift in market trends to achieve your investment goals. Instead, your money is placed into professionally managed funds that are designed to follow your risk profile and investment goals. 

Goal #3: Keep more of your returns

The third goal of passive investing is to provide you with potentially higher returns. The idea behind this is rooted in the belief of Warren Buffett, a renowned investor known for his expertise in value investing and long-term wealth-building: passive investing comes with lower fees. This is because passive investing incurs minimal costs on personnel and technological resources. Because they transact less often, passive investors often incur lower taxes, leading them to keep more of their returns. In contrast, active investors often face more tax liabilities due to frequent trading.

What are the passive investment strategies?

Invest in UITFs. Unit Investment Trust Funds (UITFs) are professionally managed funds that make it easy to start passive investing. They’re ideal for anyone who may not have the time or experience to actively manage their investments. You can stay in control of your investment decisions, while professional Fund Managers manage the Funds, which can include assets like stocks, bonds and government securities.

On top of that, UITFs offer broad diversification by spreading your investment across multiple assets instead of concentrating it in a single stock. As a result, this helps reduce risk and build a more balanced portfolio. 

Here are two types of UITFs that are great for passive investors:

1. SB Peso Cash Management Fund
2. SB Peso Money Market Fund

These SB UITFs invest in short-term, low-risk instruments like government securities and fixed income assets. They offer stability and liquidity, making them ideal for conservative investors or anyone looking for a hands-off approach. 

These funds may be a good fit if you:

• Prefer low-risk investments
• Want a simpler way to grow your money
• Don’t have time to track the market regularly 

Want to learn more about these UTIFs? Click the button below to explore how they can help support your investment goals.

Automate your investments. Automating your investments is also a key strategy to stay ahead of the market without putting in too much effort. Buffett also believed that automatic reinvestments can help fuel long-term returns. 

Through Security Bank’s Regular Subscription Program (RSP), you can automate your investments using peso cost averaging. This means  you regularly invest the same amount, buying more units when prices are low and fewer when they’re high.

This strategy help reduce risks and impact of market fluctuations, save you from the stress of timing your entry and exit points, and keep you consistent with your investment goals.

If you’re ready to automate your investments, click the button below to find out more about automated investing of Security Bank’s Regular Subscription Program.