At work, you’re a decision-maker. Every day, you’re called upon to make choices that affect the future of your company, colleagues, and clients. It all matters, so quiet days are few and far between.

Becoming accustomed to being a decision-maker means you will take work-related pressure in your stride. On the other hand, you may find it difficult to step away and let other parts of your life progress independently.

When you invest, your decision-maker mindset could get in the way. The concept of “passive investing” may seem alien to you – although often, it’s the key to long-term growth.

Continue reading to explore why passive investing can be an effective strategy and how business owners and executives can adjust to it.

Leaving your investments alone could help them grow reliably

“Passive investing” describes the process of building an investment portfolio, having a strategy, and letting that strategy unfold without micromanagement.

Let’s look at two different investment styles and how they could play out in real terms.

Investor A – the restless decision-maker:

• Spends time on trading apps every day
• Follows the financial news very closely
• Attempts to game the system by predicting the next market movement
• Sells unsuccessful holdings during a market downswing
• Monitors growth week-by-week or month-by-month.

Investor B – the passive investor

• Builds a diverse portfolio of assets with their long-term goals in mind
• Sets up automated payments into investment accounts every month or quarter
• Remains aware of market movements without feeling the pressure to act
• Reviews their portfolio annually.

The overwhelming likelihood is that Investor B would see better long-term returns.

Investopedia provides an example, based on a hypothetical $10,000 invested in the S&P 500 between 1980 and 2022.

• Left untouched, your initial $10,000 has grown to $1,082,309.
• Missing just five of the market’s best days by selling during a downturn and reinvesting later would have left you $411,258 worse off.
• Missing the 50 best days of the market means your initial $10,000 would only have grown to $76,104.

What’s more, over-active investors – particularly those who panic-sell – often regret their decisions.

This was common during the Covid-19 market downswings: in the US, 38% of people pulled money from the stock market between 2021 and 2022, Magnify Money reports. Of that group, 40% said they regretted it.

Their panic response is entirely understandable because if you’re used to thinking on your feet, waiting for things to get better on their own feels counterintuitive (although the data suggests otherwise).

Taking Investor B’s approach could be the ticket to greater portfolio growth, and it also offers personal benefits.

Remember, investments are subject to capital loss risk, so being pragmatic and understanding the risks is crucial.

Your time is a precious commodity – spend it on something that needs your input

In our recent article, we discussed why the standard practice of work-life balance is not always possible for business owners and executives. You are probably too busy to achieve total separation of work and life; fortunately, there are ways to effectively integrate the two and still carve out time away from work.

With the above in mind, being an active trader or investor is just another task to add to your to-do list.

Of course, checking in with your investments every year is important. But with so many aspects of your life needing direct daily input, your investment portfolio does not need to be one of them.

Thinking back to Investor B, putting their approach into practice means you will:

• Be unlikely to fall victim to media scaremongering
• Spend less time on trading apps
• Have fewer sleepless nights
• Likely see better long-term returns
• Gain peace of mind.

Read more: A business owner’s guide to successful investing

Get in touch with our financial planners today

Our financial planners specialise in helping business owners and professionals meet their long-term personal goals. Whether your goal is early retirement, supporting the next generation, or simply having a financial plan you can rely on, we offer bespoke advice.

To find out more about how we can help you become an unflappable investor, contact us today.

Email us at clients@iqf.ie or call 353 71 915 5560.

Please note

This article is for information only. It does not constitute advice.

It describes financial planning services that iQ Financial can offer to you. Financial planning services are not regulated by the Central Bank of Ireland.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.