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How to explain passive investing to your loved ones this Christmas

By Sam Instone - December 15, 2016

[Estimated time to read: 4 minutes]

Regular readers know that we’re proponents of passive investing – it’s old news! 

I hope we’ve managed to prove with evidence, why taking a passive approach to investing leads to the most successful outcomes.

But what about your friends and family?

How can you summarise what passive investing is for them, so they can benefit from it too?

Explain passive investing this Christmas

No one wants to be a financial bore

You might ask “why would I want to explain indexing to anyone?  I’m not a financial bore Sam!”

Fair enough! 

But let me ask you this…

  • If you discovered a money saving tip that could make a significantly positive difference, would you share it with your network of family and friends?
  • If you identified a way to regularly and consistently get positive returns on an investment, wouldn’t you tell those you cared about?

So in other words, why wouldn’t you try and explain the power of passive to those you love?

After all, it’s a way of significantly cutting costs so you have more money to invest for growth.

And it’s a way to regularly and consistently get positive returns on your investment, if you invest for the long-term.

As Christmas is traditionally a time for sharing and a time for family, why not share valuable knowledge about this international investment strategy with your loved ones this year, and make them better off in 2017?

But I said I don’t want to be a financial bore Sam…

I hear you!

And I understand that the problem is explaining passive investing in such a way that your family and friends don’t glaze over in boredom, or ask you to talk about something less confusing instead…

So how about using analogies – maybe try one of these:

Passive investing puts fat cats on a diet

The only people who get rich from traditional, actively managed investment solutions and strategies are the fat cats who sell them, and the fat cats who manage them.Passive investing puts fat cats on a diet

Meanwhile, 97.8% of such funds fail to beat their index, leaving investors starving and skinny because of their meagre returns.

Passive investing puts the fat cats on a starvation diet, and redirects well-nourished returns into your pocket.

By choosing a passive approach and low-cost index funds, you cut out the fat fees charged by the fund managers and the fat commissions earned by the brokers.

And you automatically fatten up your own portfolio’s performance with the only pounds you want to pile on in the New Year!

Building a passive portfolio is like building a career

If you hop from job to job, burning bridges or never staying in one place long enough to develop skills, you’ll probably never be able to enjoy a rewarding career.

In the same way, switching investments and strategies doesn’t work well for building a rewarding portfolio either.

If one day you’re a barista, five years later you turn to gardening, and three years on again you decide to train as a vet, there’s no career building going on.

Now consider having an investment strategy focused on picking individual stocks, then changing it to focusing on market-timing, then switching altogether and buying property to let.


Just as repeatedly changing jobs won’t lead to a rewarding career, repeatedly changing investment strategy is no way to build wealth.

Instead, build a low-cost, passive portfolio and then stick with that strategy for the most rewarding long-term results possible.

Passive investing is like taking a train rather than a rollercoaster

If you’re about to embark on a long journey, it makes much more sense to board a train than a roller coaster.

A train – your passive investment approach – is a sedate linear journey towards your chosen destination.

It’s a relaxing, comfortable, interesting, and (relatively) cost effective ride.

A rollercoaster – an active investment approach – throws you around, lurching from one direction to another, it climbs, it free falls, it makes you sick, and it takes you on a never-ending loop, so you never arrive at your chosen destination.

Active vs Passive Investing

What’s more, every time the rollercoaster does a loop the loop and throws you upside down, money falls out of your pocket, and you get off having paid a very high price for an ultimately unrewarding experience!

Here are a few more analogies you can use:

  • Passive investing is like reading an academic, scientific journal - rather than seeing a fortune-teller.
  • Passive investing may be like watching paint dry, but it’s better than throwing it at the wall and hoping it looks good.
  • Passive investing is adopting economic theory, instead of holding one finger to the wind.
  • Or, passive investing is like believing in gravity, rather than Father Christmas!

If you like these – please use them – share them with your network to help them enjoy a prosperous New Year.

But if you don’t like any of them, perhaps you have your own? 

Please share them with us in the comments below, so that other readers can benefit from your ideas – thank you!