An important disclaimer: I am not a financial advisor and none of the below should be construed as financial advice. The below details tactics that have worked for me, but you should not expect to see similar success. Stock market investing is SUPER risky, only choose strategies that work for your personal goals and circumstances, and when you need it, seek advice from an accredited financial advisor.

Also, full disclosure: I am a proud affiliate, meaning if you click a link and make a purchase, I may earn a commission at no extra cost to you. My recommendations are based on deep experience with and knowledge of the products I mention and I recommend products only when they are genuinely helpful and useful, not because of the small commissions I may receive. Please don’t spend any money on products I recommend unless you genuinely believe they will help you achieve your goals.

Passive investing can add hefty fuel to your financial freedom and FIRE goals, at least if you know what you’re doing.

If you’ve been here a while, then you might remember that FIRE means financial independence, retire early. Essentially, it means you can live on your terms by saving and investing a significant portion of your income.

While I’m still working toward my FIRE goals, I’ve used passive investing to achieve many of my financial goals over the years.

In so doing, I’ve paid off my massive student debt, grown my net worth, and considerably grown my savings. It’s been pretty worth it, at least for me.

In this article, I’m going to tell you what passive investing is and how it works. I’ll also give you a few ideas to help you get started on your own passive investing strategies.

By the way, this article is part 5 of a series of articles designed to help you level up your financial freedom goals. For more on this topic, visit the following series of articles:

Part 1: 5 Simple Tips to Help You Start Investing in the Stock Market

And 2: 4 Simple Steps for Getting Started: Investing in the Stock Market

Part 3: How Your Investments Can Fire Your Financial Freedom Goals

Part 4: Portfolio Diversification: Factors to Consider When Choosing Investments

Introduction to Passive Investing

Passive investing is an investment strategy that involves buying and holding a diversified portfolio of assets for the long term. 

So, rather than try to time the market or pick individual stocks, you invest in a broad range of assets, such as index funds or ETFs, which track a specific market index. You also keep your money in these assets for the long term.

This can be a great passive investing strategy that really takes minimal work. You simply identify your funds, invest them, and then continue to invest in the same funds over time.

The market will naturally shift, rising and falling over time, but if you invest in a fund that tracks the S&P 500 index, for instance, then you stand to gain an approximate average of about 10% per year, give or take. Not bad for something that takes minimal effort.

Why Passive Investing is Good for FIRE

There are several reasons why passive investing is a good fit for FIRE investors. 

It’s a low-cost strategy.

First, it’s a low-cost strategy. You can invest as much or as little as you please. Passive funds (via index funds and ETFs) also have typically lower fees than actively managed funds, which can save you money over time. 

And in all honesty, if you track the performance of mutual funds over time, index funds and ETFs historically perform just as good if not better than actively managed mutual funds, which usually have significantly higher costs, and therefore eat more of your gains.

It requires minimal effort

Second, passive investing is a hands-off strategy. You don’t need to spend a lot of time researching individual stocks or making investment decisions. This can free up your time to focus on other aspects of your life, such as your career or your hobbies.

It’s good for the long-term

Third, passive investing is a long-term strategy. This is important for FIRE investors because they need their investments to grow over time in order to reach their retirement goals. Passive investing has a proven track record of success over the long term.

5 Passive Investing Strategies to Consider

If you’re committed to investing to support your FIRE goals, here are some passive investing strategies to consider:

1. Invest in a broad market index fund. 

A broad market index fund tracks a major market index, such as the S&P 500 or the Total Stock Market Index. This gives you exposure to a wide range of stocks, which helps reduce your risk.

2. Invest in a target-date fund. 

A target-date fund is a type of mutual fund that automatically adjusts its asset allocation as you get closer to retirement. This can help you to stay on track with your retirement goals.

3. Invest in bond funds

Bond funds invest in bonds, which are loans that you make to governments or companies. Bonds are typically less risky than stocks, but they also offer lower returns.

4. Invest in real estate investment trusts (REITs)

REITs are companies that own and operate income-producing real estate. REITs can be a good way to get exposure to the real estate market without having to buy individual properties.

5. Invest in a robo-advisor. 

A robo-advisor is a type of online investment advisor that uses algorithms to manage your portfolio. This can be a good option for FIRE investors who want to automate their investing.

No matter which passive investing strategy you choose, it’s important to do your research and understand the risks involved. However, passive investing is a good way to build wealth over the long term and achieve your FIRE goals.

Additional Tips

Here are some additional tips for FIRE investors who are using passive investing strategies:

Start as soon as possible.

Easier said than done, right? Regardless, the earlier you start investing, the more time your money has to grow.

Automate your investments. 

Sometimes the best strategy is to automate your savings allocations and investments so that you never miss the money that went straight to your pre-arranged investments.

This will also help you stay disciplined and avoid making emotional investment decisions.

Rebalance your portfolio regularly. 

This will help ensure that your portfolio remains aligned with your risk tolerance and investment goals.

Stay patient. 

The stock market will go up and down in the short term, but it has a long history of trending upward over the long term, so be patient and stick to your investing strategy!

Live below your means. 

Not only is this absolutely necessary to achieve FIRE, but this will free up more money to invest.

Stay disciplined. 

It’s important to stay disciplined with your investment strategy, even when the market is volatile. There will be downturns, it’s completely normal, but that’s part of the reason why you’re in this for the long term, right? 

You’ll need a strong gut to bear those heartbreaking downturns, but stick to your strategies and you’ll be better served in the long-term.

As you become more experienced, you may want to consider other passive investing strategies, such as a broader mix of index funds, bond funds, REITs, or other investments that make sense for your goals. These strategies can help you further diversify your portfolio and reduce your risk.

No matter what passive investing strategy you choose, it’s important to remember that investing is a long-term game. Don’t try to time the market or make frequent changes to your portfolio. Just keep investing regularly and let your money compound over time. With patience and discipline, you can achieve your FIRE goals.

Conclusion

Have a question or want to learn more? Comment below and I’d be happy to provide you with input to support your current circumstances.

And don’t forget – posts are published on a weekly basis so check back soon for the latest ways to FIRE Your Career.

Best of luck to you on your FIRE journey.

Think passive investing will help you FIRE Your Life? Check out the posts page for more ways you can FIRE Your Career and achieve financial freedom.

FIRE Your Career: Achieve Financial Freedom Through Your Career & Spend MORE Time Doing What You Love.

Resources I frequently recommend (as related to this article):

Stock Market Simulator

The Bogleheads’ Guide to Investing (a great intro to investing book)

A Beginner’s Guide to the Stock Market (a more detailed investing book)

Tools I frequently recommend:

Strengths Finder (book to help you uncover your innate strengths, includes a free personality quiz)

ClickUp (my recommended goal-tracking and project-management tool)