What can describe the investment approach of passive investing?

The investment approach of passive investing is best described by long-term investment reflecting index performance. This strategy involves purchasing a broad market index, such as the S&P 500, and holding onto the investments over an extended period. The goal is to mirror the performance of the index rather than attempting to outperform it through active management. Passive investors typically believe that over time, markets tend to rise, and by aligning their investment strategy with the market's overall growth, they can achieve favorable returns without incurring the costs associated with frequent trading and management fees.

This approach is based on the efficient market hypothesis, which suggests that all available information is already reflected in stock prices. Therefore, trying to time the market or pick individual stocks (like active investing) is often less beneficial than simply tracking the performance of a particular index. By focusing on long-term growth and diversification, passive investing minimizes risks associated with market volatility and market timing errors.