Final answer:
The correct answer is to create an index fund, which is a passive investment strategy that seeks to replicate the overall behavior of the stock market. Other options are generally considered active investment strategies.
Step-by-step explanation:
A common strategy for passive investment is to create an index fund. An index fund is a type of mutual fund that seeks to imitate the overall behavior of the stock market, meaning it will fluctuate with the market's average performance. This is in contrast to actively managed funds, which attempt to outperform the market through more aggressive strategies. Investing in index funds is a way to practice diversification, as these funds hold a tiny share of every firm in the stock market, spreading out risk.
Aside from index funds, other investment options like hedge funds and private equity funds require a more active management approach and do not typically fall under passive investment strategies. Similarly, small cap funds are actively managed with a focus on companies with a smaller market capitalization, which is also not considered passive investing.
Moreover, tangible assets like housing can also be seen as forms of financial investment, which provide a rate of return in the form of capital gains, and a nonfinancial return, such as providing a place to live.