Passive investing is another term for the Buy & hold investment strategy. It bases on the assumption that stock indices undergo strong fluctuations, but that their long term (20,30,40 years) value rises. So in the passive strategy you invest and then do nothing (behave passive) and rely on the statistic that your investment will be worth more when you exit the investment. The longer you invest, the longer is the probability that your investment will turn out positive.
Passive investing is suprisingly effective compared to naive trading approaches, where the transaction costs often eat away any profit. Because of this, the passive way of “Buy&Hold” will be the benchmark in our backtests.