Chasing Profits, Losing Peace? The Psychology of Passive vs. Active Retail Investing in Sweden

Sammanfattning

This study examines the psychological effects of passive versus active investing on subjective well-being and ill-being among Swedish retail investors. While the financial outcomes of these strategies are well-documented, their emotional consequences have received relatively little scholarly attention. Drawing on behavioral finance, prospect theory, and financial literacy, we develop hypotheses linking investment style to emotional outcomes via three psychological mechanisms: fear of missing out (FoMO), portfolio monitoring frequency, and financial literacy. Using a quantitative survey of 1,029 respondents, the study investigates how investment strategy (whether active or passive) influences happiness, purposefulness, stress, and risk perception. Active investors engage in frequent portfolio adjustments, aiming to outperform the market through strategies like stock picking and timing, while passive investors adopt a long-term, hands-off approach, typically investing in index funds or ETFs that track market performance. Our findings reveal that active investors experience significantly higher ill-being and susceptibility to FoMO, compared to passive investors. Active investors also monitor their portfolios more frequently, a behavior contributing to higher levels of ill-being. Active investors report higher levels of self-assessed financial literacy, which correlates with greater subjective well-being. However, objective financial literacy scores show no such difference. The results highlight a clear divergence in psychological outcomes between active and passive investors. This study contributes to the growing literature on investing and well-being. These findings have practical implications for investors, financial advisors, and fintech platforms, highlighting the importance of balancing financial performance with emotional resilience in investment decisions.