Active investors try to beat the market through stock picking or timing. Passive investors buy the market via index funds. Net of fees, passive has outperformed active in most asset classes over 10+ year horizons.
Passive investing is the strategy of holding a broad market index (via ETFs or index funds) for the long term, with minimal trading and no attempt to beat the market through stock picking or timing.
It contrasts with active investing, where managers (or DIY investors) try to outperform via security selection, market timing, or sector rotation.
Cost: passive ETF expense ratios are 0.03% – 0.20%. Active funds charge 1% – 2%. Over 30 years, the fee differential compounds to lose active funds ~25% – 40% of gross returns.
Survivorship of active funds: 50% of US equity funds either close or get merged within 15 years. The publicly-quoted 'active fund' track record overstates results because dead funds get erased.
Behavioural edge: passive removes the temptation to react to news, time the market, or chase last year's winners — all of which destroy returns when individual investors do them.
SPIVA Scorecard (S&P): consistently shows that 70% – 90% of active US large-cap funds underperform the S&P 500 over 10 – 20 year periods.
SPIVA for SG funds: similar pattern. Singapore-listed active funds rarely beat the STI long-term net of fees.
Warren Buffett's bet: in 2008, Buffett wagered S&P 500 index would beat a fund of hedge funds over 10 years. He won by a wide margin (~125% vs ~36%).
Vanguard's Bogle (passive investing's founder) called this 'the relentless rules of humble arithmetic' — costs are deterministic; alpha is uncertain and rare.
Brokerage: Interactive Brokers (IBKR), Tiger Brokers, Webull — low-cost, broad market access.
Core ETFs: VWRA or IWDA (global), CSPX (S&P 500), or STI ETF (local) depending on geography preference.
Bond exposure: ABF Singapore Bond Index ETF (SGX), or BND for US bonds. SSBs and T-bills can substitute as personal-bond holdings.
DCA monthly. Rebalance annually if drift exceeds 5%. Don't touch outside that.
Buying broad market indexes (via ETFs or index funds) and holding for the long term, with minimal trading. The opposite of active investing (trying to beat the market via stock selection or timing). Costs are minimal (0.03% – 0.20% TER on broad-market ETFs).
Two reasons. Fees: 1% – 2% active fund fees compound to 25% – 40% of final wealth over 30 years. Survivorship + skill: SPIVA data shows 70% – 90% of active funds underperform their benchmark over 10+ years, even before survivorship bias is corrected.
You'll match the market — which means you participate in bear markets (-30% to -50% drawdowns are normal). The discipline test is staying invested. Investors who panic-sell at bottoms underperform passive returns; those who keep DCAing through downturns outperform.
Open a brokerage (Interactive Brokers, Tiger, Webull, FSMOne). Buy Irish-domiciled global ETFs (VWRA, CSPX, IWDA) monthly via DCA. Reinvest dividends. Don't trade. Total expected cost: ~0.10% – 0.30% per year.