What it is:
Passive investing is a strategy focused on achieving long-term appreciation of portfolio values with limited day-to-day management of the portfolio itself.
How it works (Example):
A passive investor is one who limits on-going buying and selling activities. A passive investor purchases securities, builds a portfolio, and generally holds the portfolio for the long term.
Passive investors usually do not actively buy and sell as prices change in the market. The general investment philosophy of passive investors is that their portfolios will grow with the long-term growth of the market.