What is the main goal of a passive investment strategy?

The main goal of a passive investment strategy is to replicate the return on a broad market index at minimum cost. This approach involves investing in a portfolio that mirrors the components of a market index, such as the S&P 500, without attempting to outperform it through active stock selection or market timing. By doing so, passive investors usually incur lower management fees and trading costs compared to active strategies, which can help maximize returns over the long term as the market tends to rise.

Focusing on broad market indexes allows investors to benefit from overall market performance rather than relying on the success of individual stocks. This strategy emphasizes the belief that consistently identifying high-performing stocks or market timing—hallmarks of active management—can be incredibly challenging to achieve and that long-term investment growth will typically be more effective through broad market exposure.

In contrast, options that emphasize stock selection or investing in specific types of stocks do not align with the fundamental principles of passive investing, which is largely centered around market index replication and cost efficiency. Thus, the correct answer captures the essence of passive investing effectively.