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Passive investors don’t look for the needle in the haystack, they just buy the entire haystack.
But which haystack should you buy?
Let’s dive into our ETF Portfolio today.
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Passive investing 101
Passive investors don’t try to beat the market.
They are more than happy with matching the performance of the market.
To build wealth you don’t have to beat the market, just follow these simple steps:
Spend less than you earn
Invest at least 10% of your income every single month
Everyone can do it.
You don’t need to be interested in investing or spend a lot of time researching stocks.
“Paradoxically, when ‘dumb’ money acknowledges its limitations, and starts to invest periodically in an index fund, it ceases to be dumb.” - Warren Buffett
Why Does Passive Investing Work?
Lower Costs: Passive funds are cheaper than active funds
Lower Stress: you can automate your investments and ignore the market
Market Growth: The stock market tends to go up in the long run
Another big reason passive investing works?
Diversification.
When you invest in an ETF, you own a small part of many companies.
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This spreads out your risk.
If one company does poorly, it won’t hurt you as much because you have a lot of other investments.
Diversification doesn’t just mean owning a lot of different companies.
It means owning companies in different places.
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Global Diversification
You can’t predict where the next winner will come from.
Since the bottom of the Global Financial Crisis in March of 2009, US stocks have compounded at 15% per year.
They have outperformed almost every asset over this period.