Is set and forget investing still a smart strategy in today’s unpredictable financial landscape? For decades, passive investing has been a go-to method for wealth accumulation, relying on index funds, ETFs, and long-term portfolio strategies.
However, market volatility, inflation, and economic policy shifts have challenged this approach, forcing many investors to rethink their strategies.
As the global financial system evolves, some experts argue that passive investing may no longer yield the same results as before.
This article explores the relevance, risks, and future of set and forget investing and whether it remains the best choice for long-term investors.
What Is Set and Forget Investing?
Set and forget investing is a passive investment strategy where investors create a diversified portfolio, automate their contributions, and avoid frequent market monitoring.
It focuses on long-term wealth accumulation, allowing investments to grow with minimal intervention.
This strategy often involves low-cost index funds, ETFs, and target-date funds, which require little management.
The concept is based on the belief that market growth over time will yield positive returns despite short-term volatility.
What Are the Key Features?
- Minimal trading activity: Avoiding frequent buying and selling.
- Dollar-cost averaging: Investing consistently over time to reduce risk.
- Diversification: Spreading investments across multiple assets.
- Compounding growth: Letting investments grow without interruption.
While this approach has traditionally been successful, economic uncertainties and financial shifts have raised concerns about its effectiveness in today’s market.
How Did Set and Forget Investing Become Popular?
Set and forget investing became mainstream due to its simplicity, cost-effectiveness, and long-term growth potential.
The rise of index funds and ETFs fueled its popularity among both individual and institutional investors.
Key Reasons for Its Popularity
- Introduction of Index Funds (1970s): Vanguard’s John Bogle launched the first index fund, making passive investing widely accessible.
- Stock Market Growth (1980s-2000s): Strong bull markets reinforced the belief that long-term investing was the best strategy.
- Rise of ETFs and Robo-Advisors (2010s): Technology-driven investment tools made automation easier for everyday investors.
- Lower Costs vs. Active Investing: Passive strategies eliminated the need for expensive fund managers and frequent trading fees.
- Behavioral Finance Influence: Research showed that long-term investors tend to outperform those who frequently trade.
As a result, passive investing became a dominant strategy in modern wealth-building, attracting millions of investors globally.
What Are the Key Benefits of Set and Forget Investing?
Many investors choose set and forget investing because of its efficiency, reliability, and long-term wealth-building potential.
By relying on passive strategies, investors can benefit from market growth without constantly monitoring their portfolios.
Key Advantages
- Low Maintenance: Once set up, the portfolio requires minimal adjustments, making it ideal for busy individuals.
- Reduced Emotional Decision-Making: Helps investors avoid panic selling and impulsive buying, which often lead to losses.
- Consistent Growth Potential: Historically, stock markets have trended upward over long periods, benefiting long-term investors.
- Cost Efficiency: Passive funds often have lower fees than actively managed funds, leading to higher net returns.
- Compounding Returns: Reinvested dividends and steady contributions allow wealth to grow exponentially over time.
- Diversification Benefits: Spreading investments across multiple assets reduces risk and enhances portfolio stability.
Despite these advantages, the current economic environment poses challenges, requiring investors to assess whether passive investing remains the best option.
What Are the Risks and Downsides of Passive Investing?
While set and forget investing has many advantages, it also comes with inherent risks. Passive investors must understand potential downsides that could impact long-term returns, especially during economic downturns.
What are the Major Risks?
- Market Downturns: Economic recessions and financial crises can significantly reduce portfolio value, sometimes taking years to recover.
- Inflation Erosion: High inflation diminishes the purchasing power of returns, making passive investments less effective.
- Over-Reliance on Historical Trends: Just because markets have grown in the past doesn’t guarantee similar future performance.
- Lack of Flexibility: Investors who ignore market shifts may miss opportunities to optimize their portfolios.
- Interest Rate Sensitivity: Rising interest rates negatively impact bond-heavy portfolios, affecting overall returns.
Although these risks exist, proper asset allocation and diversification can help investors reduce exposure to economic uncertainties and maintain portfolio stability.
How to Build a Set and Forget Investment Portfolio?
A successful set and forget investment portfolio requires careful planning and a well-balanced asset allocation.
The goal is to create a low-maintenance, long-term strategy that maximizes returns while minimizing risk.
Steps to Build a Successful Portfolio
- Select the Right Asset Allocation: Determine a mix of stocks, bonds, ETFs, and real estate based on risk tolerance and financial goals.
- Choose Low-Cost Index Funds: Focus on broad-market ETFs and mutual funds with low expense ratios for cost-effective investing.
- Set Up Automated Contributions: Use dollar-cost averaging to invest a fixed amount consistently, reducing the impact of market fluctuations.
- Rebalance Occasionally: Adjust asset allocation every 6 to 12 months to maintain the desired level of risk and diversification.
- Diversify Across Sectors: Spread investments across industries such as technology, healthcare, and consumer goods to minimize sector-specific risks.
By following these steps, investors can create a resilient portfolio that performs well across different market conditions.
Is Automation the Future of Set and Forget Investing?
With the rise of technology-driven investing, automation has become an integral part of passive investment strategies.
Robo-advisors, AI-based asset management, and algorithmic trading platforms are changing how investors build and manage portfolios. Automated investing eliminates emotional decision-making, making it easier to stay consistent.
Robo-advisors analyze risk tolerance, market conditions, and portfolio goals to adjust allocations accordingly. This makes investing accessible to beginners who may not have extensive financial knowledge.
However, automation is not completely foolproof. Market fluctuations, geopolitical events, and economic downturns can still impact portfolio performance. While automation reduces human errors, it lacks the ability to predict unexpected market shifts.
Therefore, a hybrid approach using automation for efficiency while manually reviewing investments periodically may be the most effective strategy for long-term success.
How Does Inflation and Market Changes Affect Passive Investing?
Inflation and market fluctuations play a crucial role in investment performance, particularly for passive investors.
Understanding these factors helps investors create resilient portfolios that can withstand economic uncertainties.
Key Factors Impacting Passive Investments
- Inflation Risk: Higher inflation decreases the value of money, reducing real returns. A 6% inflation rate means an 8% return may only yield a 2% net gain.
- Market Volatility: Economic downturns or policy changes can cause sharp declines in index funds, affecting portfolio stability.
- Geopolitical Events: Trade wars, global conflicts, and recessions influence market trends, creating unpredictable risks for long-term investors.
Strategies to Mitigate These Risks
- Diversify across asset classes by including a mix of stocks, bonds, and alternative investments.
- Invest in dividend-paying stocks for a reliable income stream that combats inflation.
- Use inflation-protected securities (TIPS) to hedge against rising costs and preserve purchasing power.
By taking proactive measures, investors can protect their portfolios from inflation-driven losses while maintaining long-term growth.
What Are the Best Set and Forget Investment Strategies?
Passive investing involves multiple wealth-building strategies, each tailored to different risk levels and financial goals. Selecting the right approach ensures optimal portfolio performance.
Proven Strategies
- Buy-and-Hold Investing: Investing in index funds or blue-chip stocks and holding them for decades, avoiding short-term fluctuations.
- Dollar-Cost Averaging (DCA): Contributing a fixed amount regularly, regardless of market conditions, to lower the average purchase price over time.
- Dividend Reinvestment Plans (DRIPs): Automatically reinvesting dividends into additional shares, accelerating compounding returns.
- Target-Date Funds: Ideal for retirement planning, these funds automatically adjust asset allocation as the investor nears their retirement date.
By combining these strategies, investors can enhance portfolio performance while minimizing effort.
What Are the Common Mistakes to Avoid in Set and Forget Investing?
While passive investing is effective, many investors make avoidable mistakes that reduce long-term returns. Awareness of these pitfalls can help investors refine their strategies.
Mistakes to Watch Out For
- Ignoring Market Conditions: Completely disregarding economic changes, interest rates, and inflation can lead to poor portfolio performance.
- Lack of Diversification: Over-concentration in one asset class, such as stocks, increases risk during market downturns.
- Emotional Decision-Making: Panicking during a bear market and selling investments can lock in losses instead of allowing recovery.
- Overlooking Portfolio Rebalancing: Failing to rebalance periodically can shift asset allocation, increasing risk exposure over time.
By avoiding these mistakes, investors can stay on track for long-term success and maximize returns.
Has the Day of Set and Forget Investing Just Ended for Many Americans?
For years, passive investing was a trusted strategy, allowing investors to ride market waves with minimal adjustments. However, economic and regulatory changes are reshaping the landscape, forcing investors to rethink their approach.
Rising inflation, fluctuating interest rates, and global instability have challenged the reliability of set-and-forget investing.
Regulatory changes are also pushing investments toward sustainable and socially responsible assets like green bonds and renewable energy stocks.
Traditional asset classes, including equities and fixed income, face volatility as government policies shift. Meanwhile, the rise of ETFs and alternative investments provides new diversification opportunities.
To navigate this new environment, investors must consider reallocating toward strong U.S. stocks, leveraging tax-loss harvesting strategies, and diversifying with alternative investments.
Adaptability is key, as failing to adjust could mean increased risks and lower returns in the years ahead.
Is Set and Forget Investing Still the Best Strategy in 2025 and Beyond?
With financial markets evolving, many investors are asking: Is passive investing still a viable strategy in 2025 and beyond? The answer depends on economic trends, risk tolerance, and investment goals.
In recent years, rising interest rates, inflation, and geopolitical tensions have disrupted financial markets. While passive investing has historically performed well, these new factors are testing its resilience.
Some experts believe that a hybrid approach—combining passive investing with strategic adjustments—may be the best way forward.
For long-term investors, set and forget investing remains a solid foundation, especially for retirement accounts, target-date funds, and diversified ETFs.
However, investors must stay informed, rebalance portfolios periodically, and consider alternative assets like dividend stocks, real estate, or inflation-protected bonds.
Passive investing can still be successful, but completely ignoring market trends may not be a wise strategy for 2025 and beyond.
Conclusion
While set and forget investing has been a powerful wealth-building tool, its effectiveness is now being tested by economic uncertainties, inflation, and market volatility.
Investors must evaluate whether traditional passive strategies still align with their financial goals.
By balancing automation, diversification, and occasional adjustments, long-term investors can continue to benefit from passive investing while adapting to new market realities.
FAQs About Set and Forget Investing
What’s the difference between passive and active investing?
Passive investing involves minimal trading, using index funds and ETFs for long-term growth, while active investing requires frequent trading and market analysis to outperform the market.
How much money do I need to start set and forget investing?
Many index funds and ETFs allow investors to start with as little as $100–$500, but a well-diversified portfolio typically requires at least $1,000 to $5,000 for better risk management.
Can set and forget investing work for retirement planning?
Yes, passive investing is ideal for retirement accounts like 401(k)s and IRAs, as it enables steady compounding growth with minimal fees over time.
How often should I check my investments in a passive portfolio?
Most experts recommend reviewing your portfolio once or twice a year to ensure proper asset allocation and rebalance if necessary.
What are the best brokerages for passive investing?
Top brokerages for passive investing include Vanguard, Fidelity, Charles Schwab, and Robo-advisors like Betterment and Wealthfront, which offer low-cost index funds.
Is real estate a good option for set and forget investing?
Yes, Real Estate Investment Trusts (REITs) offer a passive way to invest in real estate, providing dividends and potential appreciation without direct property management.
What should I do if a major economic crisis occurs?
During a crisis, avoid panic selling, review your portfolio’s diversification, and consider safe-haven assets like gold, bonds, or dividend-paying stocks to protect your investments.