passíffjárfestingu

Passíffjárfestingu is an Icelandic term that translates to "passive investment" or "passive investing." It refers to an investment strategy where the investor aims to mirror the performance of a specific market index, such as a stock market index. Instead of actively selecting individual securities or timing the market, passive investors typically use index funds or exchange-traded funds (ETFs) that hold a broad portfolio of assets designed to track a particular benchmark. The core principle is to reduce costs and management fees associated with active trading, as the goal is not to outperform the market but to match its overall return. This approach is often favored for its simplicity, low expense ratios, and long-term growth potential. It aligns with the belief that consistently beating the market is difficult and often not worth the associated costs and risks. Passíffjárfestingu is a cornerstone of modern portfolio theory and has gained significant popularity among both retail and institutional investors.