If you’ve ever been around financially-inclined people, you’ll likely have heard them drop the adage, make money work for you. After hearing those words, you might have taken them on board. After all, it seems sensible to accumulate a substantial amount of money and then invest it into something that generates respectable returns. It’s not an uncommon concept, considering savings accounts work based on the same principle.
However, many people want to invest their money into something that will generate higher yields. As a result, they turn their attention towards the stock markets and options world. If you’ve actively invested or traded in this world, you’ll know that two schools of thought exist. On one side, you’ve got the active traders. On the flip side, you’ve got passive investors. Both approaches have a similar goal – to generate profits. However, the way they reach that goal is vastly different. For instance, passive investing focuses on long-term growth and stability. Conversely, active trading is about making daily or weekly trades to create an additional income stream.
Let’s explore the concept of passive investing in more detail.
Why Get Into Passive Investing?
In 2010, investment companies passively-managing index funds only constituted 19 percent of the total market. However, by 2020 this number rose to 40 percent. According to Bloomberg, passive investing is likely to overtake active investing by 2026, if not earlier. They believe a bearish market could propel passive investing ahead of active investing even quicker.
Several reasons exist behind why passive investing is becoming so popular. For starters, passive investing results in lower trading fees and brokerage fees than active investing. Likewise, it doesn’t require a significant time commitment. If you’ve ever day traded, you’ll know it can take up most of your time. You’ll find yourself glued to your computer screen as you look for any profitable trading opportunities to arise. Likewise, active investing typically requires a more comprehensive understanding of the market than passive investing. Hence, many investors prefer to settle for long-term stability, hoping to incur dividends as their rewards.
How to Approach Passive Investing
You might be thinking of passively investing your money to grow your fortunes. Logically, that’s a financially prudent decision. Here are some tips to get you started with passive investing. They include:
Select Your Market
Most passive investors look towards financial markets for investment. You will often find many opting for stocks. Investors like them because they typically give you a higher return on your investment. Although most passive investors will settle for index funds, you can also opt for single stocks that you choose yourself.
Consider going through the S&P 500 Index. In addition, you might also want to check out the Dow Jones Industrial Average Index and the Russell 2000. If they don’t appeal to you, you might want to try picking individual stocks instead.
Consider Call Options
Many investors often overlook options. However, if you use them properly, they can benefit you. For instance, you might want to consider using a call option if a stock attracts your attention. Let’s assume you see XYZ company as prospering in the future. Currently, you only want to spend $1,000 of your savings on the stock. If XYZ company is trading at $50 a stock, you could only buy 20 shares of it. However, if you use a call option, you could come to terms with a seller to purchase shares of the company at $55 in the future. That means that if the stock reaches $70, your agreement will still enable you to purchase it for $55. Hence, you might want to look into using call options.
Get Started with OptionsXtra
OptionsXtra is an options trading platform and a stock trading platform. They provide various options trading services, including options trading advisory services and options trading alert services. In addition, they offer numerous stocks trading services, including free real-time stock alerts.
Furthermore, they also have options trading groups and stock trading groups, enabling you to confer with other investors and seek recommendations.
Visit their website or contact them to get started.
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