Why does Passive Investing outperform active investing?

There are two ways to invest in the stock market: passive and active. Passive investments are made for the long term, and they involve holding securities in a predefined portfolio of stocks and other asset classes.

Mutual funds and ETFs are examples of passive investments. In contrast, active investing involves selecting particular stocks or assets based on the fund manager's experience, with the aim of maximizing returns. However, this comes at a cost because the portfolio is regularly traded.

Passive investing is suitable for individuals who do not have a lot of time to make investment decisions and lack financial understanding. Due to lower expenses and less trading of the portfolio, passive investing has been shown to generate greater profits than active investing.

With passive investing, we gain the benefits of diversification, which means not putting all our eggs in one basket. Passive funds are typically designed to track an entire market or a specific index.

Conclusion:-

Of course, there are exceptions where active investing has yielded exceptional returns, but for the most part, passive investing is a more profitable and cost-effective way to achieve long-term benefits.