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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]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

Hands off hedge fundsHands off hedge funds
heinonline.org [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

Hands off my brand! The financial consequences of protecting brands through trademark infringement lawsuitsHands off my brand! The financial consequences of protecting brands through trademark infringement lawsuits
journals.sagepub.com [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

Hotels to OTAs:“Hands off my rates!” The economic consequences of the rate parity legislative actions in Europe and the USHotels to OTAs:“Hands off my rates!” The economic consequences of the rate parity legislative actions in Europe and the US
www.sciencedirect.com [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

Credit Rating Immunity-How the Hands-Off Approach toward Credit Rating Agencies Led to the Subprime Credit Crisis and the Need for Greater AccountabilityCredit 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]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

European defence firms: The information barrier on private financeEuropean defence firms: The information barrier on private finance
www.tandfonline.com [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

Bank-based versus market-based financial systems: A growth-theoretic analysisBank-based versus market-based financial systems: A growth-theoretic analysis
www.sciencedirect.com [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

The active construction of passive investors: roboadvisors and algorithmic 'low-finance'The active construction of passive investors: roboadvisors and algorithmic 'low-finance'
academic.oup.com [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …

Private equity-financing with anticrisis odourPrivate equity-financing with anticrisis odour
dk.upce.cz [PDF]
… On the basis of previous research we expect an early stage investor to have a … the less he or she invests in high-tech ideas compared to international investing companies … able to show that venture capitalists with more specific knowledge support more hands-off than generalists …



Q&A About Hands-Off Investor


What is an investor?

An investor is a person who allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest).

How does one become an investor?

One becomes an investor by allocating capital with the expectation of a future financial return (profit) or to gain an advantage (interest).

What are some examples of hands-off investors?

Some examples include index funds or target date funds which make only small and slow changes to their holdings, and therefore do not require much monitoring.

What are some examples of different types of investments?

Examples include stocks, bonds, securities, real estate, infrastructure, currency, commodities and tokens.

Are there different types of investors?

Yes, there are.

What does it mean to be a shareholder?

It means that you own stock in a company.

How does the strategy differ from active management?

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.

Why might someone choose a hands-on approach over a hands off approach?

Many 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 higher tax rates on short term capital gains and non qualified dividends.

What is a hands-off investor?

A hands-off investor prefers to set an investment portfolio and make only minor changes for a long period of time.

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