What Christian Investors May Learn from the Rise of Passive Investing

Over the past two decades, passive investing has gone from a niche strategy to the dominant force in U.S. markets. Today, more than half of all equity assets are in index funds or exchange-traded funds (ETFs) that track major benchmarks like the S&P 500. For Christian investors, this trend raises important questions. What are the advantages of passive investing? What are the limitations? And how should faith influence the way we engage with market trends?

Understanding Passive Investing

Passive investing refers to a buy-and-hold strategy that aims to mirror the performance of a specific market index, rather than trying to outperform it. Unlike active managers, passive funds do not make judgments about which stocks are good buys or when to get in or out of a position. They simply follow the index.

Benefits include:

• Lower fees: Passive funds typically have lower expense ratios.

• Simplicity: With fewer trades and minimal decision-making, it is easier to understand what you own.

• Performance: Over long periods, many passive funds have outperformed actively managed funds after fees.

But it is not without downsides.

Passive May Be Popular, But It Is Not Always Personal

While passive investing may offer convenience and cost-efficiency, it also comes with trade-offs. For example:

• No screening: Most index funds include companies regardless of their business practices. This means your dollars may be invested in companies that profit from activities you find ethically concerning.

• No customization: Passive portfolios are not built for your unique goals, values, or tax considerations.

• Market exposure: Indexes rise and fall with the market. There is no built-in protection from volatility.

What Does Faith Have to Do With It?

As a Christian investor, your goal is not only to grow your wealth. It is to steward it. That means looking beyond performance charts and asking deeper questions.

We believe Christian investors should ask:

• Are my investments aligned with biblical values?

• Am I investing in a way that reflects my calling and convictions?

• Does my portfolio reflect who I am and what I believe?

Passive investing may be a useful tool, but it is not a one-size-fits-all solution. A thoughtful strategy considers what you own, why you own it, and how it aligns with your faith and purpose.

How Stonecrop May Help You Align Strategy with Stewardship

At Stonecrop, we help Christians explore whether passive investing is serving their goals and values. In some cases, we incorporate faith-based screens, direct indexing, or blended strategies to better reflect who you are and what you believe.

If you want to make sure your portfolio is doing more than following the crowd, reach out to us at info@stonecropadvisors.com. Let’s explore how your investments may align more fully with your faith.