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How Technology Helps to Invest

Investment portfolios are under tremendous pressure, and no one is an exception. However, technology can be a huge help as investors are in a much easier position than they were 20 years ago. Now, not only within the company, it is necessary that technological innovations be used to the maximum by the company’s managers in terms of process optimization, cost reduction, or increase in income, but also in the corporate and private financial spheres. The obvious solution: cut costs and increase revenue/yield where possible. In the investment world, things are different. A good solution for this would be to rebalance the investment portfolio towards passive investment funds, which operate with a quarter of the cost of their counterparts available in banks and insurance companies and are widely accepted.

Passive investment funds

Passive investment methods and funds are designed to avoid the fees and limited performance that come with frequent trading. Most passive investment funds are so-called. It is available as an ETF.

The purpose of passive investment is the gradual accumulation of wealth. Passive investing is also known as a “buy and hold” strategy, which means that securities are bought for the long term. Unlike active traders, passive investment funds do not want to profit from short-term price fluctuations and do not try to catch the best entry point. The passive investment strategy is based on the universal economic relationship that companies grow in the long term, so markets grow; you can use it, not necessarily think from a ten-year perspective.

Will receive passive investment funds, the costs of which are only a fraction of traditional investment funds. By 2026, the share of passive investment funds worldwide will be higher than actively managed investment funds by fund managers.

Costs of passive investment funds

The costs of public investment funds in Hungary averaged around 1.5-2% per year in 2020; these figures have been in the range of 2.5-3% due to rising inflation and fund management costs.

Compared to this so-called, the cost ratio of passive investment funds is 0.05-0.5%/year. And technical progress makes it possible for investors to no longer be forced to use exclusive, but at the same time, much more expensive investment products offered by banks and insurance companies because an investment portfolio can even be formed independently for a quarter of the cost.

In addition, passive funds outperform actively managed counterparts in terms of returns. According to a JP Morgan survey, the difference is about 1.3-2% in favor of passive funds. Thus, this could result in an annual difference of up to 5% if investors take the time to reorganize their investment portfolio in line with modern solutions.

Disclaimer: I understand investments, the stock market, and stocks – I understand money. 0% spam, 100% investment in knowledge.

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Sandra Loyd
Sandra Loyd
Sandra is the Reporter working for World Weekly News. She loves to learn about the latest news from all around the world and share it with our readers.

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