Hands-Off Investor

What is ‘Hands-Off Investor’

An investor who prefers to set an investment portfolio and make only minor changes for a long period of time. Many hands-off investors use index funds or target date funds which make only small and slow changes to their holdings, and therefore do not require much monitoring.

Explaining ‘Hands-Off Investor’

A hands-off investment strategy is well-suited to many retail investors who may not have the time needed to routinely monitor and research their investments. Hands-on, active management requires investors to continuously keep up-to-date on the positions that they hold. This often requires several hours of research per week. Active managers believe that by doing this work, they can earn higher-than-average returns on their investments.

A hands-off strategy is not necessarily underperforming. Many investors believe in an indexing approach, which posits that sticking with a well-diversified portfolio over the long term is the key to wealth. Since index funds often have very low expense ratios, hands-off investors often enjoy a built-in advantage over active traders who pay more in trading commissions, lose out to the bid-ask spread and incur the higher tax rates on short-term capital gains and nonqualified dividends.

Further Reading

  • Selection and support strategies in venture capital financing: high-tech or low-tech, hands-off or hands-on? – www.tandfonline.com [PDF]
  • Hands off hedge funds – heinonline.org [PDF]
  • Hands off my brand! The financial consequences of protecting brands through trademark infringement lawsuits – journals.sagepub.com [PDF]
  • Hotels to OTAs:“Hands off my rates!” The economic consequences of the rate parity legislative actions in Europe and the US – www.sciencedirect.com [PDF]
  • Credit Rating Immunity-How the Hands-Off Approach toward Credit Rating Agencies Led to the Subprime Credit Crisis and the Need for Greater Accountability – heinonline.org [PDF]
  • European defence firms: The information barrier on private finance – www.tandfonline.com [PDF]
  • Bank-based versus market-based financial systems: A growth-theoretic analysis – www.sciencedirect.com [PDF]
  • The active construction of passive investors: roboadvisors and algorithmic 'low-finance' – academic.oup.com [PDF]
  • Private equity-financing with anticrisis odour – dk.upce.cz [PDF]