Passive investing is an investment approach in the Nigerian Stock market that aims to maximise returns on investment in the long term by minimising trading activities.

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It involves building a well-balanced portfolio intended to replicate the performance of a stock market index. Passive investing is defined in contrast to active investing.

Passive investing aims to build wealth in the long term. Therefore, it involves buying a security to own it for a long time. Unlike active investors, passive investors do not aim to profit from short-term fluctuations in the stock market. Instead, believe the market will deliver the best returns over a long period.

Is Passive Investing Better?

Passive investors tend to outperform active investors in the long run. In a highly volatile market such as the Nigerian stock market investors seeking to get the highest return on investment with less stock monitoring often opt for passive investing.

How risky is passive investing?

Just like any investment strategy, passive investing has its own risk. Passive investment strategies are not designed to outperform the market but to generate returns close to their benchmark index. This results in performance constraints and a lack of flexibility in investments. However, the major advantage of passively investing in Nigerian stocks is diversification across a wide range of securities. By spreading risk across various securities across various sectors of the economy, passive investors can shoulder the impact of short-term fluctuations in the stock market.

How do I become a passive investor in the Nigerian stock market?

Become a passive investor in the Nigerian stock market with these easy steps:

1. Create an Account: Open a brokerage account with a trusted stock broker and fund your account.
2. Get Educated: Acquaint yourself with the terms and concepts of the Nigerian stock market
3. Goal setting: Identify your investment goals and time frame for achievement. As a passive investor, your goals should be set for the long term.
4. Index Fund: Research index funds on the Nigerian stock market, preferably those with adequate diversification and low expense percentages.
5. Reinvest: Have a disciplined approach towards investing in your chosen index fund. Re-invest as often as possible.
6. Monitor your portfolio: Passive investing requires little monitoring. But it is important to review your portfolio periodically to ensure it aligns with your investment goals

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