THE FUTURE OF PASSIVE INVESTING TRENDS AND OPPORTUNITIES

It’s been estimated in recent years that passive investment has gained more and more popularity as opposed to active investment, and this trend is very likely to continue. In fact, a BlackRock analysis predicts that by 2025, passive investments would control close to 50% of all assets managed globally. So, what exactly are the trends of passive investments and how do they affect the opportunities gotten from it? All of these are what we will discuss in this article.

But, before we get on to the main discussion, what do you understand by passive investment? The goal of passive investments is to mimic, as opposed to outperforming the performance of a specific market index or benchmark. Investing in a fund that monitors the performance of the index or benchmark will help you achieve this. The objective of passive investing is to provide similar returns to the market while paying lower fees and taking less risk than actively managed funds. 

THE MAJOR TRENDS OF PASSIVE INVESTMENT

One of the major trends of passive investments is the increase in environmental, social, and governance (ESG) investing. Environmental, social, and governance aspects of a corporation are taken into consideration when investing using the ESG methodology. Future predictions predict that this trend will continue as investors place a greater emphasis on supporting businesses that are socially and environmentally responsible. As a result, we can anticipate an increase in the quantity of passive funds with an ESG investment concentration.

The rising use of technology is another trend in passive investment. Technology developments have made it simpler and more affordable to invest in passive funds and monitor their performance. For instance, robo-advisors, which are gaining popularity, employ algorithms to invest in a portfolio of passive funds that are suited to the investment objectives and risk tolerance of a customer. Future trends are expected to follow this one as technology continues to progress and become more widely available.

The rising popularity of factor investing is a third popular trend in passive investment. Investing in stocks with certain traits, such as low volatility, substantial dividends, or strong momentum, is known as factor investing. This strategy aims to capture the premium associated with each factor and has been shown to outperform the market over the long term. As a result, we can expect to see an increase in the number of passive funds that are focused on factor investing.

THE FUTURE OPPORTUNITIES OF PASSIVE INVESTMENTS

The possibility of reducing fees: Since less research and analysis are continuously needed for passive funds, their costs are lower than those of actively managed funds. As a result, investing in passive funds can help investors save money on fees. This is crucial in an economy with low-interest rates since every dollar saved on fees can add up.

The potential for more and better diversification: Investors can acquire exposure to a variety of businesses and industries by making an investment in a fund that tracks a broad market index or benchmark.

IN CONCLUSION

It has been seen that passive investment has a promising future. By 2025, it is anticipated to rule the investment world. With less risk and expense, this investing approach seeks to match the market index's performance. Passive funds will increase as a result of the growth of ESG investment, which monitors environmental, social, and governance policies. Another emerging trend is factor investing, which involves buying stocks with particular characteristics. Compared to active funds, passive investing offers prospects for reduced fees, more diversity, and superior performance. In general, passive investing has a bright future, and investors should anticipate seeing more ESG and factor-focused funds while also reaping the benefits of lower fees and more diversification.

Article Provided by Charles Sells – Charles Sells began his career investing in tax liens at the age of 23. Like many of us, he was enticed by the simplicity and profitability often conveyed in popular coaching programs and weekend workshops. However, experience taught him that success required more than a simple snap of the fingers. So, at 26, Charles kicked the pitchmen to the curb and started his own business, helping investors discover realistic profits investing in distressed real estate. The model was simple: use his growing knowledge, integrity and tenacity to help others grow alongside him, in experience and in profits. One investor at a time, Charles has built a reputable business helping individuals invest passively in everything from tax liens to the ever-so-popular fix-and-flip. Fast-forward 20 years and Strategic Passive Investments has transacted hundreds of millions of dollars in distressed real estate investments on behalf of nearly 1,000 investors worldwide. Charles and his team at SPI have taken the stress out of investing in distressed real estate, by enabling investors to have their individual investments remain in their name and their control, retaining 100% ownership, with Charles and The SPI team at the helm to make certain those investments remain profitable.